Carrier copes with forex risk; Govt urged to encourage overseas investments
National carrier Thai Airways International plans to set up a special working committee to manage foreign-exchange risks after the baht surged this week.
With 70 per cent of its sales coming from foreign markets, and revenue in 50 foreign currencies, it has become essential for the listed company to monitor the baht’s movements more closely, especially against major currencies including the pound sterling, yen, euro and US dollar.
THAI president Sorajak Kasemsuvan acknowledged that recent foreign-exchange volatility had an impact on the company’s operations, but said it was too early to estimate the extent. At a meeting yesterday, board members raised concern over the issue and asked executives to take a closer look at it. Currently, the company uses forward exchange contracts to manage such risk.
Sorajak said THAI’s outlook remained strong. He expects total revenue to grow by 11 per cent to Bt223 billion this year. Ticket sales are expected to grow 12 per cent to Bt183 billion. Profit before exchange losses and gains is expected to total between Bt5 billion and Bt6 billion.
Growth will be driven by the expansion of the world aviation market, forecast at 4-5 per cent, with Asia expected to be a fast-moving region. Over the next five years, Asia will become the major driver, contributing 50 per cent of total sales to the world’s market, analysts say.
For 2012, THAI expects to record net profit of more than Bt700 million. The company will also pay a dividend after a hiatus last year because of losses in excess of Bt10 billion in 2011. The amount of the dividend will be decided at a shareholders meeting on April 27.
Danuj Bunnag, THAI’s executive vice president, said 2013 should be a good year for the company as the country’s political situation is expected to remain stable.
This year, the firm will keep expanding its regional network to make Bangkok a hub for the aviation industry after the launch of the Asean Economic Community in 2015.
Under this plan, subsidiary Thai Smile will fly narrow-body Airbus A320 aircraft to regional destinations. On March 31, Thai Smile will launch its service to Mandalay, Myanmar, with five flights week. The firm is also scouting destinations among secondary cities in India and China. THAI hopes to add two cities from each nation. This year, cabin factor – the proportion of available seats used – is projected at 76 per cent, after 76.6 per cent in 2012, the firm’s best performance in five years.
PTT executive vice president for energy, economics and policy Chodechai Suwanaporn said the government should encourage Thai companies to use the baht’s rise as an opportunity to invest in Asean or further afield.
This would help stem the currency’s appreciation and provide an opportunity to the Thai private sector to establish a presence overseas.
PTT’s long history of investing overseas helped it mitigate the effects of the baht’s rise, he said, adding that the firm has adopted many hedging activities. The baht’s rise against the US dollar also provided a good opportunity for PTT to expand its overseas business, Chodechai said.