The national carrier, which claims it had no idea Prince Faisal al-Saud was involved in the deal, insisted it will not proceed with the sale despite earlier accepting a US$2.5 million (79.5 million baht) deposit.
The move is likely to further strain diplomatic ties between Thailand and Saudi Arabia, which have been almost non-existent since the "Blue Diamond Affair" of 1989, when a Thai janitor working in the Riyadh palace of Prince Faisal stole close to 100kg of jewellery.
The aircraft in question is one of four Airbus A340-500s _ registered as HS-TLA, HS-TLB, HS-TLC and HS-TLD _ which the national carrier decommissioned and put on the market at the beginning of this year.
London-based consultancy firm AvCon Worldwide Ltd offered to buy the plane coded HS-TLD for $23.5 million and the other three for $20 million each.
THAI later agreed to sell only HS-TLD to the aviation consultancy firm, which was apparently representing Prince Faisal.
The company put down a deposit of $2.5 million three months ago.
The plane was due to be delivered to at the end of last month, but never arrived.
THAI president Sorajak Kasemsuvan told the Bangkok Post Sunday the company's offer had been forwarded to the airline's board for consideration, but the board had rejected the deal, saying the price was too low.
The airline attempted to return the deposit, but AvCon has not taken back the payment, Mr Sorajak said.
"The board didn't agree with the purchase offer, because the aircraft's book value was $66 million," the THAI president said. "If it was sold for $23 million, it would run up a recorded loss of over $40 million, which might subject [related parties] to investigation."
Mr Sorajak insisted he had no idea the Saudi prince was involved in the deal, saying THAI had been in contact only with AvCon.
However, an AvCon consultant and coordinator, who declined to be named, said the Saudi prince acknowledged the purchase offer in writing. The written acknowledgement was appended to the company's formal offer document submitted to THAI.
The consultant said the offer of $23.5 million was reasonable. The current market price of an A340-500 _ provided it meets air safety standards and has clocked up more than 3,000 hours of flight time _ range from $15 million to $18 million apiece, he said.
The four Airbus planes put up for sale, despite having low flight times, are not in a condition to fly, the AvCon representative said.
He claimed the aircraft were short on maintenance and their operational licences had expired.
He said THAI had only informed AvCon of the board's decision to reject its purchase offer via email, which is not an appropriate channel of communication for such a matter.
THAI should issue a formal letter explaining its reasons for not going through with the deal, the consultant added.
AvCon public relations representative Sakchai Pinnaree claimed the Saudi prince had hoped that, had the purchase been a success, it could boost bilateral relations between his kingdom and Thailand.
A source in THAI's committee considering the aircraft's sale said the purchase offer was submitted to the board twice before it was finally rejected.
"Paying a deposit does not amount to an absolute settlement of a deal," the source said. "If the board doesn't approve, that's the end of it."
The source admitted the plane's book value of US$66 million is unrealistic given the fast depreciation of the A340-500, but said the $23.5 million offer was still too low.
The airline believed AvCon revealed the prince's name in an attempt to keep the sale price low, the source said.