The strong cabin factor reflects the national carrier's success in pitching the corporate-market segment. The freight factor, however, is currently only in the 60-per-cent range, as the volume of THAI's cargo usually depends on available space in the aircraft. As such, there is always a trade-off between passengers and cargo for the airline. Since its peak last August, jet-fuel prices have dropped 22 per cent.

In response to the decline in fuel prices, THAI has increased its fuel hedging position from only 5 per cent at the end of its fiscal year 2005-2006 (October 1, 2005, to September 30, 2006) to 26 per cent at the end of its first quarter (October 1, 2006, to December 31, 2006) and about 36 per cent at present.

As of the end of THAI's fiscal year 2005, fuel expenses accounted for 35 per cent of its operating expenses. Therefore, easing fuel prices will certainly benefit its bottom line.

Keeping everything constant, the brokerage's forecast model suggests that Thai Airways International's earnings will increase 3 per cent for each US$1 (Bt35.82) per barrel decrease in the price of jet fuel.