I am having the exact same situation with Thai Airways. Their Contract of Carriage is very clear, yet they have been unwilling to abide by the terms.
A month after I purchased two round-trip business-class tickets I found out they had cancelled both the outbound and inbound flights I purchased. According to their Contract, they will, at pax option, book pax on an alternate flight which is acceptable to pax either by their own services or those of another carrier. Article 9.
Because they do not have any flights for the date I have booked, I asked to be book on any one of four alternate flights, including two on one of their alliance partners. They have refused and are only willing to put me on Thai flights one day earlier than booked, and without any accommodation for the 24+-hour layover they are imposing in both directions.
After two weeks of back-and-forth thru the TA, I was advised today that Thai has withdrawn the offer and wants me to take a refund.
In his article Flight or Fight: The Airline Passengers' Bill of Rights, Timothy M. Ravich wrote, "When passengers purchase tickets for air travel they do not imagine their final destination as a court of law. Passengers merely want to get to wherever it is they are going. Laws intending to help passengers after the fact obviously do nothing to prevent such fact from happening in the first place. Airlines, meanwhile, have every business, as opposed to legal, incentive to serve their customer."
I feel very strongly that Thai Air is in breach of contract and acting in bad faith. But short of a court of law, what's passenger to do?
Ironically, this is from Thai Airways Code of Ethics:
8. Honor promises and terms offered to clients, and where it is impossible to do so, inform them promptly so that a suitable solution can be found.
9. Refrain from setting conditions that are unfair to the clients.