The board of Thai Airways International (THAI) has met and approved an emergency financial plan to seek additional funding and sell aircraft and property to avoid cash flow problems, according to local reports. The action is part of the national carrier’s 2014-18 rehabilitation plan.
The reports cites a source, who said that THAI had determined it was nearing a cash flow problem from this month based on a worst-case scenario that projected 2014 earnings would be lower while expenditure was unchanged. The source said that the airline expected to post 7.59bn baht (THB) – equivalent to US$240m; £140m – in earnings before interest, taxes, depreciation, and amortisation (EBITDA) on total revenue of THB195.02bn.
Although THAI still had room to borrow THB12bn from financial institutes, as part of a total committed revolving credit line of THB19bn, that figure was insufficient.
“THAI needs to maintain a minimum cash requirement of THB8bn a month,” the source said. “If the financial situation is not turned around, the company’s cash flow for operational activities after August will be lower than THB5bn.”
He added that THAI was keen to improve its cash management through seeking more funds and disposing of aircraft, buildings and land.
THAI’s chairman, Air Chief Marshal Prajin Juntong, said the airline would borrow THB1bn from Standard Chartered and between THB5bn and THB7bn from the Government Savings Bank (GSB) in a bid to maintain its ratio of cash flow to revenue at 15%.
He added that THAI also plans to raise THB27bn by the second half of next year and would then ask the Finance Ministry for the balance of funding needed. A major chunk of the raised money would go back to Standard Chartered and GSB.
The board also agreed to defer pre-delivery payment for aircraft and rent planes instead of leasing them.
Prajin expects THAI to post a net loss of not less than THB12bn this year – similar to its 2013 figure. “But the loss could reach THB20bn if the carrier fails to achieve its financial plan,” he said. THAI aims to cut expenses by THB4bn and increase revenue by THB3bn in both 2014 and 2015.
Cash-flow based metrics now feature prominently alongside traditional revenue measures of business performance in the key figures or financial summary pages of any public company.
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