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Slight losses expected from low-cost carrier relocation

Airports of Thailand Plc expects to show a small decline in earnings, following a special discounts offered to low-cost airlines as incentives for relocation from Suvarnabhumi Airport to Don Mueang Airport.



Bualuang Securities said in its research note that AOT has agreed to provide discounts on landing and parking charges and rental fees) to low-cost carriers (LCCs) to return to Don Mueang Airport. The management estimated that earnings would decline by Bt245 million during the fiscal years 2013-2015 under the worst-case scenario where no additional traffic uses the freed up capacity at Suvarnabhumi Airport.

"That would be much shallower than our assumption of a Bt900 million profit fall."

Don Mueang’s soft opening is slated for August and it is expected to start a full-scale service by October. The biggest low-cost airline in focus is Thai AirAsia, which caters services to 8 million passengers per annum.

"If all the low-cost carriers were to relocate, passenger capacity at Suvarnabhumi Airport equal to 11 million people would be freed up. The potential earnings accretion would more than offset the impact of the discounts offered. Don Mueang could potentially cater to more 21.5 million people after the relocation. This plan would reduce AOT’s capital expenditure needs of Bt12 billion for the construction of domestic terminal at Suvarnabhumi Airport," the house said.




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