When Thailand’s flag carrier filed for business rehabilitation in May, the airline’s creditors strapped in for what is looking to be a long and possibly wild ride.

Thai Airways International’s rehabilitation could take years, lawyers familiar with the process told Cirium at the time, adding that the carrier’s complex 98-strong fleet of 11 types, with 40 of the aircraft on lease from 15 lessors, would only complicate the process.

Now, Thai Airways’ beleaguered budget compatriot Nok Air has also found itself knocking on the door of Thailand’s Central Bankruptcy Court, rehabilitation petition in hand.

With 21 leased aircraft – it also self-manages one 737-800 – split between just two types and leased from eight lessors, according to Cirium fleets data, Nok Air’s restructuring will be simpler than Thai’s – at least on the fleet front.

“They’ve got 737s and Q400s, so it’s only a two aircraft [type] fleet, so in that sense it’s not quite as complicated as Thai,” says Alan Polivnick, a partner at Watson Farley & Williams (WFW) in Bangkok.

“That does mean it’s a much more straightforward process in terms of negotiating with the lessors.”


At least one lessor with exposure to Nok Air did not seem particularly surprised about the rehabilitation filing.

While the airline did not tell him in advance that it was planning to file, he says he could read between the lines in the weeks running up to the filing, noting that the airline’s troubles predate Covid-19 and that the airline was already talking about a restructuring last year.

“I could tell with the language on the phone, them not being very responsive, not committing,” he says.

He does not blame Nok Air for concealing its hand ahead of the filing, saying it is a fair part of the negotiation game between lessors and airlines.

“What the airline is deliberately trying not to do is have the assets seized,” he says, adding that the airline probably would not have even told a lessor with which it has an especially good relationship.

A second lessor is taking a backseat approach for now.

“They are following the same plan as Thai, so we will have to wait and see,” a source with the organisation tells Cirium.

Some of the lessors with exposure to Nok Air are top 10 leasing giants with hundreds of aircraft in their portfolios, like GECAS and Avolon, while others, like Merx and ALAFCO, have fewer than a hundred aircraft each, Cirium fleets data show.

To make just one comparison, aircraft leased to Nok Air make up 3.57% of Merx portfolio by number of aircraft, while BOC Aviation’s exposure to Nok Air represents only 1.06% of its portfolio, referencing Cirium data.

Those smaller lessors are thus likely to feel more pain from not receiving Nok Air’s lease payments than the leasing behemoths, Polivnick says.

“The larger lessors are probably more philosophical in the sense that it’s four aircraft out of 200 737s we have, but if you’ve got four aircraft with Nok and that’s four out of your 20, it’s a far bigger financial impact. That may be where the lessors will have to be very careful because I guess the airline and the rehabilitation planners may approach the negotiations almost on that basis,” he says.

Some of Nok Air’s lessors may have less experience dealing with a business rehabilitation scenario than others.

“For a number of the lessors involved with Nok, they don’t have exposure to Thai Airways as well, so for some of them this is the first time they are dealing with rehabilitation under the Thai bankruptcy act and there are obviously a lot of questions about what that means,” Polivnick says.

“What does it mean for lease payments? What does it mean for the aircraft? Those kinds of questions.”

Some lessors did get a token sweetener recently. Cirium understands that some lessors received payments of around $500,000 each from the airline, covering a couple of months’ rent. Why the airline decided to make those payments so close to the court-appointed stay on creditor claims coming into effect is unclear.

“It may be that those payments were made at a time when they were not ready to make a decision on rehabilitation and they did that. That said, at the moment the risk of repossession is relatively low because most lessors are not going to have anywhere to put the planes and there’s no sort of remarketing opportunities at the moment,” says Polivnick.

“I suspect part of it was to avoid confrontation with the lessors prior to the rehabilitation, maybe.”


Due to that automatic stay on creditor claims that came into effect when the Thai bankruptcy court accepted the airline’s rehabilitation petition at the end of July, lessors will not be receiving any rentals from the airline until at least after the 27 October court hearing.

But there is no reason for the airline and lessors to twiddle their thumbs for the next two months. If lessors and the airline are able to get a lot of the negotiating legwork done before that hearing, this could speed up the process, Polivnick says.

He says the airline and its rehabilitation planners can use the time between now and the court date to negotiate with lessors and try to reach an agreement. This would address a “fairly large part” of the airline’s liabilities.

“For example, if they reach an agreement with the lessors to restructure the leases and they are either payment holidays or discounts, the airline can presumably take advantage of that already rather than waiting until October to negotiate something,” he says.

Another Asia-based lawyer agrees, saying that while the parties cannot ink anything, they could certainly come to pre-contractual agreements.

He says that a possible outcome could be that the Jurangkool family, which holds a controlling stake in Nok Air, agrees to inject further capital, on condition that lessors and other creditors agree to certain terms.

“With Nok, because it’s not a government-linked entity there is less baggage. If the family says ‘We will put in another X-hundred million dollars as long as you agree this’, it may be a compelling proposition,” the person says.

Nok Air has appointed one entity – Grant Thornton Specialist Advisory Services – and five people as rehabilitation planners. These are all already affiliated with Nok Air. They comprise two board members, Prinya Waiwatana and Tai Chong Yih; two directors, Kasemsant Weerakun and Chavalit Uttasart; and Nok Air’s chief executive Wutthiphum Jurangkool.

“It’s their baby,” the Asia-based lawyer says, referring to the Jurangkool family. “They are the planners. I am sure they will come up with some sort of [plan]: ‘We will put in more money if you agree [to the] proposal’.”

It is also likely, he adds, that part of that agreement will involve lessors having to take a haircut on rent.

“The lessors are in a sticky position because there is going to be a massive surplus of aircraft,” he says, adding: “The proposal will include material reductions of rent.”

He goes on to say: “What are they [the lessors] going to do with the aircraft otherwise? If this was boom season and it was just one airline falling over, the lessors could just take the aircraft and say ‘We will lease it to somebody else who will give us a better rental’.”

Herman Tse, an aviation analyst at Ascend by Cirium, says that while the rehabilitation filing is not good news for lessors, they do have a strong cashflow to sustain them.

“The lessors will not receive any aircraft lease rentals from Nok Air until at least late October. However, Ascend has observed that the lessors have been actively improving the liquidity via different channels since the outbreak of Covid-19,” he says.

“Besides, the fleet size of Nok Air is not large, with 21 aircraft in total. There is impact – but it is not significant.”

Fortunately, Nok Air has a relatively slim orderbook. It has unfilled orders for six Boeing 737 Maxes, scheduled for delivery in January 2022, May 2022, September 2022, December 2022, April 2023 and December 2023, according to Cirium fleets data.

Since the restructuring of the airline under business rehabilitation may include a streamlining of its fleet, the airline may seek to cancel or postpone these deliveries.

“I’m guessing they will try to walk away from the Max orders and for the existing 737-800s, try to renegotiate the leases,” the Asia-based lawyer says.


Earlier this week, Nok Air’s chief financial officer Nuanwan Bhuprasert resigned from the company less than three weeks after taking up the job. A 3 August stock exchange filing announcing Bhuprasert’s departure did not provide any reason, and Nok Air and Bhuprasert did not respond to requests for comment from Cirium.

It is not clear yet who will replace Bhuprasert, but Polivnick says whoever that person may be will be expected to provide support to the restructuring, even if they are not one of the rehabilitation planners.

“At the end of the day, the CEO is unlikely able to deal with all of this alone, and to the extent that Grant Thornton needs models, revenue, background, whatever, that’s where the CFO will come in,” says WFW’s Polivnick.

What is not in doubt is that the choices over the coming months by Nok Air’s rehabilitation planners, as well as its creditors, will decide the fate of the airline.

“The market is not going to recover this year or next. Airlines are burning cash every day. Not only Nok Air, but also the major shareholder Thai Airways International, is under financial pressure, and has been even before Covid-19,” says Ascend by Cirium’s Tse.

“Liquidity is the key to survive in this challenging period. The restructuring plan will be critical for turning the business around in this adverse operating environment.”

This analysis is written by Michael Allen, Asia Finance Editor at Cirium.