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Thai Airways aims to buy 30 aircraft to Modernize Fleet

Thai aims to buy 30 aircraft to Modernize Fleet

2017 06 27

2017 06 27

By Supunnabul Suwannakij

* Company seeks planes offering fuel efficiency, more comfort
* Carrier talking with both Airbus and Boeing about new aircraft

Thai Airways International said it plans to modernize its fleet by replacing almost 30 older aircraft over the next five years, adding to the climbing demand for planes in Asia.

The state-run airline is seeking new generation aircraft offering greater comfort and fuel efficiency, and is talking with both Airbus SE and Boeing Co., Chairman Areepong Bhoocha-Oom said in an interview with Bloomberg Television’s Haslinda Amin.

"The portfolio of our airline will have new aircraft almost 100 percent," Areepong said. It’s the right step for Thai Airways partly because fuel costs could be volatile in future even though they are low currently, he said.

Thai Airways’ purchases would add to the hundreds of aircraft worth billions of dollars ordered by Asian airlines, such as AirAsia Bhd. and IndiGo in India, amid a surge in the number of people traveling by air in the region. Boeing forecasts a $6.05 trillion jetliner market in the next two decades globally.

The Bangkok-based carrier is trying to turn around performance after posting losses in three of the past four years. The company’s shares fell 6.1 percent Monday, the most in almost two months, and are down 75 percent from a high in 1999. The stock has eight sell recommendations, nine holds and one buy rating, according to data compiled by Bloomberg.

Concerns that the aircraft purchases could weigh on Thai Airways’ financial health appear to have hurt the stock Monday, according to Siam Tiyanont, an analyst at Phillip Securities (Thailand) Co. in Bangkok.

"The airline’s financial status has recently improved after years of challenges," Siam said. "The plan for new aircraft purchases may be too early and could result in a jump in debt.”

Thai Airways presently has a 100-strong fleet and will seek Cabinet approval for the plane replacement plan by the end of July, Areepong said in the interview Thursday on the sidelines of a conference in Bangkok. Airbus’s A380 superjumbos will remain a significant part of the company’s fleet, while older Boeing 747s will be replaced in the years ahead, he added.

An overhaul of marketing and reservation contributed to record passenger cabin factor of about 85 percent in the first quarter and the full-year target is 80 percent, Areepong said. 

The airline’s goal is to exceed last year’s net income, Areepong said. Thai Airways swung to a profit of 15.1 million baht ($445,000) in 2016. It lost money in each of the three prior years.

The airline needs new airplanes to modernize its fleet and boost competitiveness, said Raenoo Bhandasukdi, an analyst at KT Zmico Securities Co. in Bangkok. Thai Airways is expected to bolster profits this year, which would be a good outcome given that some other full-service carriers have struggled against competition from low-cost rivals, Raenoo said.

The carrier signed an agreement with Airbus in March to explore joint development of a maintenance, repair and overhaul facility at U-Tapao International Airport near the tourist destination of Pattaya. The project could involve about $1 billion investment and the plans may be finalized in 2018, Areepong said at the conference in Bangkok on Thursday.

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