Thai airlines joining trend to list on stock market

Airlines are joining the trend to list on the Stock Exchange of Thailand to raise funds for business expansion.

Nok Air, a low-cost carrier, and Bangkok Airways are the latest to pursue this option, while Asia Aviation (AAV), the operator of Thai AirAsia, the biggest low-cost carrier, and Thai Airways International, the national carrier, are already listed. The four airlines play leading roles in the domestic and regional markets.

Amnart Ngosawang, an analyst at Finansia Syrus, said the entry of two more airlines to the SET would offer more choice for investors. They can compare business performance and choose the one that in their view provides the best potential for a return on their investment.

Vitai Ratanakorn, Nok Air's chief financial officer, agreed that having more airlines on the SET would lure more investors, especially investment funds. Also, this trend would boost confidence in growth of the industry.

Vitai said it was not a big surprise to see airlines listing on the stock market. The current business environment has forced them to raise funds for new aircraft to expand their networks and survive amid fierce competition.

AAV listed in May last year. Nok Air planned to list in 2011, but delayed its plan because of the flood crisis. Its shares will begin trading this Thursday. Bangkok Airways, which calls itself a boutique airline, will float its initial public offering in the next few months.

Nok Air expects to raise Bt3.25 billion from its IPO of 187.5 million shares, priced at Bt26 (S$1.0) each. Media reports have said Bangkok Airways is expected to float 730 million shares for US$320 million (Bt9.78 billion). Last year, AAV raised $143 million from its IPO.

Amnart said Nok Air showed bright prospects for investment in its stock, followed by AirAsia and THAI. He had received little information about Bangkok Airways so far, especially its sales-revenue structure.

Nok Air execs hope it will keep growing by 30-40 per cent annually over the next three years because of its strong local passenger base, and focus on flying to secondary cities nationwide.

Nok Air CEO Patee Sarasin believes his firm will enjoy a good reception from investors after it begins trading on the SET. The airline has a good future for both domestic and regional destinations.

However, the former are the company's core market, while regionally it will go step by step as opportunities arise.

Lucrative market

Patee said Asia was a lucrative market for aviation at a time when the United States and Europe have financial problems.

The International Air Transport Association has forecast that the Asia-Pacific will provide the biggest net-profit contribution to global aviation with turnover of some US$4.2 billion this year, up from the previous projection of US$3.2 billion and US$3.9 billion in 2012.

Asian carriers also account for 40 per cent of the total cargo market.

The US aircraft producer Boeing has predicted that the Asia-Pacific region will see nearly 50 per cent of global air-traffic growth over the next 20 years, with annualised growth of 6.3 per cent.

This includes travel into, out of and within the region. Domestic and international travel within the region will grow 6.5 per cent per year.

Amnart said the aviation outlook in Thailand in the second half of this year was good. Major risks to the industry include natural disaster, political chaos, rising fuel prices, and higher competition.

Further into the future, he said Thailand's aviation prospects would remain positive.

Given its strategic location, the country is considered an aviation hub with connections to China, India and neighbouring nations.

Tourism in the Kingdom will also help boost airline performance as they carry foreign passengers to destinations across the nation.

Amnart said the trend was clear that low-cost carriers would outgrow their full-service peers. As a result, the rising number of low-cost carriers abroad, such as Indonesia's Lion Air, will play a rising role here.

AirAsia has seen this opportunity. Tassapon Bijleveld, Thai AirAsia's CEO, said the business had more room for growth driven by the growing economy, the tourism boom, including more and more Chinese travellers, and the implementation of the ASEAN Economic Community in 2015.