The cabinet on Tuesday decided that Thai Airways International Plc (THAI) must go through rehabilitation via the bankruptcy courts.
Prime Minister Prayut Chan-o-cha said the cabinet didn't give financial help to the airline because it must save the money for relief schemes for the whole economy.
The government had three choices; find more money to keep the airline flying, let it go bankrupt, or let THAI be the subject of a bankruptcy court-approved rehab plan. "We've decided on the third option," Prayut said.
The court-dictated rehab, however, will involve reducing the Finance Ministry's majority stake in THAI and cost the airline its state enterprise status.
THAI should be allowed to continue operating to generate income so it can regain business strength, Prayut said.
Prayut insisted the government has to be cautious with its spending given the huge Covid-19 relief loan it has taken out.
"We need to think our spending through carefully now the pandemic has struck. It's for the survival of our citizens," he said.
