As Thai Airways awaits a ruling from the Bankruptcy Court on its proposed restructuring plan which was doggedly opposed by some creditors, the extent of the underlying corruption and mismanagement at the airline up to its collapse this year has been touched upon by an investigation directed by a former police commissioner, Lieutenant General Charnthep Sesaves.

The Thai Parliament, this week, is to hear damning evidence of corruption and wrongdoing within the national airline which while it is no longer officially a state enterprise, still retains the state as its major shareholder. The investigation, led by a former Metropolitan Police Commissioner, has unearthed definite evidence of corruption and has linked an aircraft deal with Airbus in 2003 and 2004 to the firm’s ultimate descent into becoming a huge loss-maker before collapsing in late May this year when it filed for bankruptcy before a court in Bangkok. 

Deputy Transport Minister, Thaworn Senneam is to report to parliament later in the week on the matters which have come to light in the course of a now halted investigation led by former Metropolitan Police Commissioner, Lieutenant General Charnthep Sesaves. He is expected to tell the House of Representatives that the inquiry found endemic corruption within the airline and outline some egregious examples of both corruption and mismanagement at the former state enterprise which collapsed in May. A key finding of the panel, however, was that a controversial deal, questioned at the time by at least one state agency, to purchase 10 aircraft from Airbus to operate on routes to the United States, was the beginning of the end for Thai Airways now in bankruptcy and waiting for a court decision in September on its restructuring plan.

The Deputy Transport Minister, Thaworn Senneam, on Friday, briefed the media on the failure and eventual collapse of Thai Airways which is currently before the Bankruptcy Court awaiting a ruling expected in mid-September on its restructuring plan. The proposal has been opposed by several creditors including a number of Thai institutions.

On Friday, the minister detailed the issues raised by an investigation conducted by a panel which looked at the shortfalls and failures of the company in a limited time frame from 2017 to 2019 but led on to a wide array of issues emerging in all aspects of the firm’s operations.

Initially, among the key issues that were to be investigated was the national airline’s income from 25.4 million passengers who flew with Thai Airways in 2019, alone, and which came to only ฿6,000 per passenger.

Fixed overhead costs of ฿5 billion to ฿6 billion per year even before liftoff is a hard load to carry

This performance combined with what appear to be fixed overheads of ฿5 to ฿6 billion per month helps explain the dire performance of the firm leading to its ultimate bankruptcy in late May.

It is a hard load to carry for the airline whose traditional agent-based marketing system led it to be uncompetitive quoting high priced fares and yet its passenger income per seat, in the last trading year, has now been revealed to have been so modest.

The investigation, led by former Metropolitan Police Commissioner, Lieutenant General Charnthep Sesaves, commenced in the summer into anomalies in income from passenger tickets and a range of issues.

The inquiry reported back in recent weeks that corruption was rife in Thai Airways and pinpointed a key departure as the start of the airline’s rapid descent into losses from 2008.

Trail of corruption and bad management leads back to the purchase of an Airbus fleet in 2003 and 2004 for New York and LA long-distance flights

The former policeman and his team followed a trail of corruption throughout the firm but identified as a key factor in the firm’s decline, the huge purchase of wide-bodied aircraft from Airbus in 2003 and 2004 to facilitate direct flights by Thai Airways from Bangkok to the United States with routes to Los Angeles and New York.

Prior to the collapse of the airline, the french based Airbus withdrew from a proposed partnership with it, to establish an aircraft maintenance business within Thailand’s eastern economic corridor.

On Friday, the Deputy Transport Minister, Mr Thawaor confirmed that the purchase of the Airbus planes was the key decision that launched Thai Airways on its flight into financial chaos which its current management is trying to make sense of.

Ten planes which began to fly in 2005 and which led quickly to haemorrhaging losses the next year

A total of ten Airbus A340-500 and A340-600 jets were purchased by the airline to fly the Thai US routes which it operated from 2005 to 2013 with disastrous consequences.

By 2006, the airline had notched up a loss of ฿12 billion which later ballooned to ฿62.8 billion in 2008 driven by oil prices and costs to fly non stop from Bangkok to the United States.

There has been some speculation, over the weekend, that the minister, a Democrat MP from Songkhla province, without saying it, may have been pointing the finger at former Thai premier, Thaksin Shinawatra who was prime minister at that time riding a wave of popularity which ultimately led to him winning reelection in February 2004.

Some senior Thai executives became rich quickly says former police chief leading the investigation panel

However, the senior former policeman, Lieutenant General Charnthep, who directed the inquiry for the Ministry of Transport had his sights closer to home, when, in the last few weeks, he claimed that several senior employees of Thai Airways received financial benefit indirectly from that massive deal or put another way, corrupt payments, bribery or fraud.

‘Corruption had definitely occurred,’ Police Lieutenant General Charnthep Sesaves has confirmed.

The investigators noted that, before the flights to the United States went ahead in 2005, the Office of the National Economic and Social Development Council had raised concerns and objections to the purchase and use of these types of aircraft based on fuel costs.

That body, quite rightly, anticipated that it could lead to heavy losses for the airline.

The probe also identified irregularities with lease agreements relating to US-made Boeing Aircraft and discovered a divergence between different lease agreements with similar specifications which amounted to nearly ฿600 million.

Deputy Minister of Transport to report to parliament on Wednesday as the probe was halted

It is understood the deputy minister will brief the House of Representatives at the Thai parliament on Wednesday on the matter on the instructions of his senior minister, Saksayam Chidchob.

The junior minister has also revealed that the legal arm of the government, the Council of State, had ordered the investigating panel to wind down its inquiries.

This was on the basis that, after last May, Thai Airways was stripped of its status as a state enterprise, therefore, removing its oversight of the airline.

In essence, the probe had lost its legal basis in law to exist.

Findings to be sent to the National Anti Corruption Commission detailing irregularities

Notwithstanding this, the ministry and the investigating panel plan to hand their findings to the National Anti Corruption Commission so it can look into the wide range of irregularities and corruption that existed within the former state-owned airline which still retains the Thai government, through the Ministry of Finance, as its major shareholder.

Among some of the top-line findings was a technical worker within the airline who was found in one year to have worked 415 days overtime for which he was paid an extra ฿3 million. 

The report showed that the average monthly remuneration across all Thai Airways employees was over ฿123,000 per month.

Auditors demurred when requested in May to sign off accounts for the former state enterprise

Before this month’s hearing in front of the Bankruptcy Court which took longer than expected, the company’s auditors Deloitte Touche Tohmatsu Jaiyos Co., Ltd refused to sign the firm’s audited accounts for the most recent year on the basis that they could not be certain of it as a valid going concern.

The firm did appear for the company, however, in its hearing before the court this month along with its restructuring consultants.

Decision due next month

It is expected that the bankruptcy court, in mid-September, will give the green light to the new restructuring plans for the airline although it has been closely fought by some opposing creditors including Dhipaya life Assurance Pcl which, at one point, insisted on being involved in the planning process which comes next.

If the court agrees to the plan next month, an order will be published in the Royal Gazette and creditors will have one month to file their claims.

At that point, the new management of Thai Airways will brief all creditors on the firm’s plan to relaunch the airline with new, lower operating costs as well as a more market-orientated and competitive approach to selling seats on its flights.

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