Thailand's government said on Monday it plans to submit a rehabilitation plan for troubled national carrier Thai Airways International to a bankruptcy court rather than go ahead with a planned rescue. "The State-Enterprise Planning Office agreed in principle for the rehabilitation of Thai Airways in court ... the procedure will be submitted to cabinet tomorrow," government spokeswoman Narumon Pinyosinwat said.

The procedure replaces a previous rescue, which involved the airline seeking a 58.1 billion baht ($1.81 billion) loan guaranteed by the government to ensure liquidity and help it through the outbreak of the new coronavirus.

"It is similar to filing Chapter 11 in the United States," she said, adding that the details of the rehabilitation plan and when it will be submitted will be discussed by the cabinet on Tuesday.

By May, airlines around the world had grounded about 95% of their capacity as air travel all but came to a standstill due to the coronavirus pandemic.

Thai Airways, though, had been in trouble even before the outbreak of the coronavirus, booking losses every year after 2012, except in 2016.

In 2019, it reported losses of 12.04 billion baht.

As a state-controlled enterprise, the Ministry of Finance, which owns 51% of the national carrier, would approve and initiate the proceedings, bankruptcy law expert, Vicha Mahakul, told Reuters.

"The rehabilitation plan would have to show clarity in how the company will recover and propose a capable person as the planner who is accepted by all sides," Vicha said, adding that the planner would be key in the process.

Under Thai law, creditors, debtors and state agencies can initiate rehabilitation proceedings.

The Thai Airways workers' union said it agreed with the steps.

"We agree with these steps since the court would be unbiased ... previous rehabilitation plans were unsuccessful because they were influenced by politicians," its President Nares Peung-yaem said, adding the union would not agree with any plans to reduce the government's shareholding below 51%.

Thai Airways shares slumped 12% on Monday, and are down about 38% in 2020.

($1 = 32.0300 baht)

(Reporting by Panarat Thepgumpanat and Chayut Setboonsarng; Editing by Muralikumar Anantharaman)