Facing financial obligations in the middle of the COVID-19 pandemic, Thai budget carrier Nok Air will enter bankruptcy protection and undergo a court-supervised rehabilitation.

Thailand's bankruptcy court issued an order accepting a petition from the airline with the first hearing set for October 27. With the acceptance of the petition, the budget carrier will get a stay on its financial obligations worth around THB 26 billion (~USD $830 million).

While the airline faced financial difficulties in previous years, the current COVID-19 pandemic has further restricted its ability to operate its full network.

In a report on the Bangkok Post, Nok Air CEO Wutthiphum Jurangkool said the airline has not operated its 18 international routes, and the airline is currently paying passenger refunds. Its domestic network in 23 provinces in the country are operating at 30% of its pre-pandemic capacity.

"It's company policy to refund all passengers who had to cancel flights during the coronavirus crisis as soon as possible, resulting in a heavy burden on us, as well as a lower income," Jurangkool said.

As the airline will be required to submit a business rehabilitation plan to the court, Jurangkool said: "The airline won't be bankrupt but we have to solve our liquidity problem."

Nok Air will become the second airline in Thailand to enter bankruptcy protection proceedings this year following national carrier Thai Airways. Thai Airways holds a 13% stake in Nok Air.

The budget carrier was also a majority stakeholder in Nok Scoot (51%), a joint venture with Singapore Airlines' Scoot based in Thailand. Nok Scoot recently shut down operations and entered liquidation last month (June).

Based in Bangkok, the airline was founded and started operations in 2004. It currently operates a fleet of over 20 aircraft including Boeing 737-800s and Bombardier Dash 8 Q400s.

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