Thai aviation stocks experienced significant declines on Monday amid broader geopolitical tensions and surging energy costs. Thai Airways International (SET: THAI), Asia Aviation (AAV), and Bangkok Airways (BA) all saw their share prices drop substantially, reflecting investor concerns about the sector's outlook.
An analysis from Krungsri Securities highlights that the sector faces continued pressure from two primary factors: rising fuel costs and declining revenues. The conflict in the Middle East has led to travel restrictions and safety concerns, dampening demand for travel to and from affected regions.
Fuel expenses, which account for approximately 30-40% of airline operating costs, are expected to further impact profitability. Krungsri notes that low-cost carriers like AAV are more vulnerable due to thinner margins, especially if fuel prices rise beyond certain thresholds. Similarly, Thai Airways faces increased costs, as fuel makes up over 40% of their expenses.
Revenue risks are particularly pronounced for Bangkok Airways, which relies heavily on passengers from Europe and the Middle East, with a significant portion of its income derived from codeshare flights with airlines in the affected regions. The potential closure of airspace in these areas could impact its top line significantly. Meanwhile, Thai Airways benefits from routes that do not require stopovers in the Middle East, thus somewhat limiting its exposure.
Despite the short-term challenges, the outlook remains cautiously optimistic due to the anticipated recovery of Chinese tourism. Krungsri forecasts an increase in tourist arrivals to Thailand and highlights potential growth opportunities for airport operators such as AOT and development projects like U-Tapao Airport. Bangkok Airways is regarded as a top pick, supported by plans for new investments and attractive dividend yields.
