THAI Gets A+ From TRIS Rating

5th Jan 2015

The airline had earlier proposed to issue of up to THB4 billion of its senior unsecured debentures which bear a negative outlook.

THAI President, Mr. Charamporn Jotikasthira, announced in December 15 last year the A+ rating that it received from TRIS. He disclosed that the airline will use the proceeds to finance its maturing debts and other financial obligations.

The positive rating reflects the confidence that the government has bestowed on the airline as a state-controlled entity, as well as being the national flag carrier.

Being the state flag carrier, THAI will surely get the support that it needs from the government during difficult times, so it comes as no surprise that it gets the A+ rating. This is to ensure that the airline won't succumb to bankruptcy.

Thai Airways International is a government-controlled company with the Ministry of Finance (MOF) holding the majority share with 51%. Other significant shareholders include Vayupak Fund (owned by MOF), which has 15.1% stakes, and the Government Savings Bank (GSB) which owns another 2.1%.

Thai Airways International operates a full-service carrier using the THAI brand, as well as a premium-service brand, Thai Smile. It also has a controlling stake, about 40%, in NOK Airline, a major budget airline which operates an extensive domestic network across the country.

The state-controlled airline has been struggling during the past five years with its operating margin that has been continuously falling from 19% in 2009 down to 4.5% in the first 9 months of 2014. The airline blamed the falling profitability due to several factors, most notable of which are natural disasters and political crisis. The surging jet fuel prices also have an impact, along with the increasing competition by new players in the industry.

The carrier's level of leverage is increasing and is projected to stay in that level in the medium term. Its planned capital expenditures within the next four years is expected to hit THB80 billion for the acquisition of more fuel-efficient aircraft.

Thai Airways International is just among the seven state-controlled loss-making enterprises that are prioritized by the government to undergo major restructuring program. The government has already appointed and delegated the country's State Enterprise Policy Commission as its representative in each of the seven state companies' Board of Directors to formulate what restructuring plans they can possibly propose.

The airline is expected to complete its restructuring plans within this month.

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