Struggling Thai sweating on oil price cuts
The Australian reports that analysts say troubled carrier Thai Airways International should benefit from lower oil prices after posting its worst quarterly profit since 1997.
That seems to be one of the few rays of sunshine in an otherwise unsettled outlook for the airline.
Thai blamed a worse than expected 9.3 billion baht second-quarter loss on the high cost of jet fuel and a currency loss.
The airline spent 64 per cent more on jet fuel in the three months to June 30 and booked a 5.03 billion baht currency loss on its debts in euros and US dollars.
The currency loss came as the baht weakened 5.9 per cent against the euro in the second quarter and 6.1 per cent against the dollar, Bloomberg reported.
Analysts highlighted the need for more restructuring at the Thai carrier.
The Centre for Asia-Pacific Aviation said Thai was still suffering from a lack of progress in this area and investors would treat it cautiously until the problem was solved.
“The carrier’s stock has fallen 56 per cent so far this year, on concerns that Thai’s underlying business is poorly positioned to cope with the current environment, despite reasonable traffic growth rates this year,” the centre said yesterday.
The centre said the airline had increased domestic capacity as budget unit Nok Air had faltered and the key European market had been weak.
Growth in business to the US would be hit in the second half after the airline dumped its ultra-long-haul A340-500 service, and while load factors were reasonable it faced greater competition and yield erosion in many key markets.
Thai Airways was also growing more slowly than regional competitors Singapore Airlines and Cathay Pacific as it sought to focus on more attractive routes.
“Thai Airways president Apinan Sumanaseni has sought to assure investors that if oil prices stabilise, our overall earnings will be positive again,” the centre said.
“The recent fall in the price of oil should ensure Thai reports better third-quarter results.”
“Until Thai undertakes a fundamental reform of its business — and that involves resolving its short-haul strategy — earnings will continue to be captive to the gyrations of oil and currency markets.”
Other analysts agreed.
“It’s a tough time for Thai Air and all other airlines due to these high fuel prices,” Terapatr Mathanukraw, an analyst at Seamico Securities said. “Flight cuts and route rearrangements would help curb Thai Air’s costs until fuel prices come down.”
A Report by The Mole from The Australian
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