TRIS Rating Co., Ltd. has affirmed the company rating of Thai Airways International PLC (THAI) and the ratings of its current senior debentures at "AA-". At the same time, TRIS Rating has assigned "AA-" ratings to THAI's proposed senior debentures totaling up to Bt15,000 million. The ratings continue to reflect THAI's capability to consistently deliver favorable profit, its dominant position in the domestic market, a strong presence in international air routes in and out of Bangkok and the benefits it derives from being a member of Star Alliance, the world's largest airline alliance. The ratings are enhanced by THAI's status as the national flag carrier and the major ownership stake held by the Thai government. These strengths are partially offset by intense competition, due to excess capacity in the global airline industry, increased risk from rising and fluctuating jet fuel prices, and THAI's high debt burden. Although the company's plans for fleet expansion and product renovation will enhance its competitive position, it must make large capital expenditures, which will be partly funded by additional borrowing.
While the "stable" outlook is based on the expectation that THAI will continue to generate favorable performance due to continued strong demand for air transportation and the continued support from the government as its major shareholder. However, the company may face a more difficult competitive environment and higher fuel costs, which can only be partly passed on to customers as a fuel surcharge.
TRIS Rating reported that currently, the Thai government directly holds 54% of THAI's shares, down from 79% in 2003 following a public offering of 285 million shares in 2003. The Vayupak Fund, which is an investment fund originated by the Ministry of Finance to invest in listed state enterprises, also has a stake in THAI. Although the government has reduced its stake in THAI during the last two years, it has clearly stated its intention to retain a minimum of 51% of the carrier's shares. As a state enterprise and the national flag carrier, THAI has received strong financial and operating support from the government. The Thai government has provided THAI with bridge loans and has helped the company obtain funding sources.
In 2004, THAI enjoyed a strong market position for both international and domestic routes, with a 47% market share of total passenger traffic through Bangkok International Airport. THAI controlled around 64% of domestic passenger traffic at Bangkok International Airport in 2004. Some competition has sprung up after the government implemented an "open skies" policy in 1998 and fully liberalized the industry in 2000 by allowing all Thai airlines to freely operate every route, subject to availability of traffic rights. In terms of international passenger arrivals and departures in Bangkok in 2004, THAI was the leader, with a 41% share. This share represents a slightly drop from 43% in 2003 but is still far higher than the runner-up, Singapore Airlines, which had 5% market share in 2004. The company will likely be able to maintain its market share for international routes because its existing traffic rights and airport slots are well protected. To enhance its competitiveness over the next five years, the company plans to expand its fleet from 84 to 105 aircraft. These new proposed debentures are parts of THAI's financing plan for the large capital expenditures, as the proceeds from the proposed debentures will be used as down payments for aircraft and for working capital in 2005.
THAI has consistently delivered favorable performance, even during the last economic crisis, despite global worries over terrorist attacks and twin outbreaks of Severe Acute Respiratory Syndrome (SARS) and bird flu. In fiscal year 2004 and for the first three months of fiscal year 2005 (October-December 2004), THAI's total revenue increased around 13% over the same period of the previous year. Its operating margin maintained at around 25% due to higher operating expenses. In terms of cash flow protection, its earnings before interest tax depreciation and amortization (EBITDA) interest coverage and funds from operations (FFO) to total debt improved due to improving cash flow, TRIS Rating said. -- End
Thai Airways International PLC (THAI) Company Rating: Affirmed at AA- Issue Ratings: THAI08OA: Bt5,500 million senior debentures due 2008 Affirmed at AA- THAI09OA: Bt7,500 million senior debentures due 2009 Affirmed at AA- THAI10OA: Bt4,500 million senior debentures due 2010 Affirmed at AA- THAI11OA: Bt4,500 million senior debentures due 2011 Affirmed at AA- THAI14OA: Bt3,000 million senior debentures due 2014 Affirmed at AA- THAI#6: Up to Bt6,000 million senior debentures due 2008 AA- THAI#7: Up to Bt6,000 million senior debentures due 2011 AA- THAI#8: Up to Bt3,000 million senior debentures due 2015 AA- Rating Outlook: Stable
While the "stable" outlook is based on the expectation that THAI will continue to generate favorable performance due to continued strong demand for air transportation and the continued support from the government as its major shareholder. However, the company may face a more difficult competitive environment and higher fuel costs, which can only be partly passed on to customers as a fuel surcharge.
TRIS Rating reported that currently, the Thai government directly holds 54% of THAI's shares, down from 79% in 2003 following a public offering of 285 million shares in 2003. The Vayupak Fund, which is an investment fund originated by the Ministry of Finance to invest in listed state enterprises, also has a stake in THAI. Although the government has reduced its stake in THAI during the last two years, it has clearly stated its intention to retain a minimum of 51% of the carrier's shares. As a state enterprise and the national flag carrier, THAI has received strong financial and operating support from the government. The Thai government has provided THAI with bridge loans and has helped the company obtain funding sources.
In 2004, THAI enjoyed a strong market position for both international and domestic routes, with a 47% market share of total passenger traffic through Bangkok International Airport. THAI controlled around 64% of domestic passenger traffic at Bangkok International Airport in 2004. Some competition has sprung up after the government implemented an "open skies" policy in 1998 and fully liberalized the industry in 2000 by allowing all Thai airlines to freely operate every route, subject to availability of traffic rights. In terms of international passenger arrivals and departures in Bangkok in 2004, THAI was the leader, with a 41% share. This share represents a slightly drop from 43% in 2003 but is still far higher than the runner-up, Singapore Airlines, which had 5% market share in 2004. The company will likely be able to maintain its market share for international routes because its existing traffic rights and airport slots are well protected. To enhance its competitiveness over the next five years, the company plans to expand its fleet from 84 to 105 aircraft. These new proposed debentures are parts of THAI's financing plan for the large capital expenditures, as the proceeds from the proposed debentures will be used as down payments for aircraft and for working capital in 2005.
THAI has consistently delivered favorable performance, even during the last economic crisis, despite global worries over terrorist attacks and twin outbreaks of Severe Acute Respiratory Syndrome (SARS) and bird flu. In fiscal year 2004 and for the first three months of fiscal year 2005 (October-December 2004), THAI's total revenue increased around 13% over the same period of the previous year. Its operating margin maintained at around 25% due to higher operating expenses. In terms of cash flow protection, its earnings before interest tax depreciation and amortization (EBITDA) interest coverage and funds from operations (FFO) to total debt improved due to improving cash flow, TRIS Rating said. -- End
Thai Airways International PLC (THAI) Company Rating: Affirmed at AA- Issue Ratings: THAI08OA: Bt5,500 million senior debentures due 2008 Affirmed at AA- THAI09OA: Bt7,500 million senior debentures due 2009 Affirmed at AA- THAI10OA: Bt4,500 million senior debentures due 2010 Affirmed at AA- THAI11OA: Bt4,500 million senior debentures due 2011 Affirmed at AA- THAI14OA: Bt3,000 million senior debentures due 2014 Affirmed at AA- THAI#6: Up to Bt6,000 million senior debentures due 2008 AA- THAI#7: Up to Bt6,000 million senior debentures due 2011 AA- THAI#8: Up to Bt3,000 million senior debentures due 2015 AA- Rating Outlook: Stable