BANGKOK (Reuters) - Airports of Thailand PCL, a major beneficiary of the country’s tourism boom, is adding new airports to its portfolio to ease demand, President Nitinai Sirismatthakarn told Reuters on Monday.
The influx of tourists has lifted revenue and the share price, but is putting pressure on infrastructure and services.
“Demand is outpacing supply,” Nitinai said adding that AOT increased capacity to 101 million in its 2017 fiscal year, whereas passengers numbers reached 129 million.
“We expect 10 percent passenger growth this fiscal year and continued growth for the next 4-5 years” Nitinai said.
AOT, which manages six airports in Thailand including the Suvarnabhumi airport in Bangkok, will build two additional airports to serve Chiang Mai and Phuket, both tourist cities where airports are at overcapacity.
Thailand expects tourist arrivals to reach 37.5 million this year, up 6 percent from 2017.
In February, the Phuket airport had to close overnight due to cracks in the runway.
AOT reported a 12.3 percent jump in profit in its second-quarter ending in March, booking 7.3 billion baht ($228.70 million), will finance the 126 billion baht construction bill on its own, he said.
“We have about 63 billion-64 billion baht of cash on hand and EBITA of 30 billion a year,” he said.
Construction will take about four years, but the bottleneck will be in how fast land can be acquired, he added.
AOT, Thailand’s second largest company after energy giant PTT Pcl, will also receive four airports currently under the Department of Airport, next year, pending cabinet approval, he said adding that this will increase its market share from 86 to 88 percent.
AOT was also interested in managing the new U-Tapao airport but would have to review the terms first, he added.
Thailand’s main airport, Suvarnabhumi, has a capacity of 45 million passengers but receives 60 million a year, but its second phase is underway, he said.
Airport reviewer, Skytrax ranks Suvarnabhmi Airport 36 out of 100, one spot ahead of Paris’ Charles de Gaulle Airport while travellers complain about long immigration lines, poor services and pilots warn of deteriorating infrastructure.
AOT’s expansion for Suvarnahumi was delayed due to “political stability changes in government and policy,” he said, adding under this government airport expansion was able to proceed.
Thailand is governed by a military junta, which came into power in a coup in 2014.
By 2022, Suvarnabhumi will add a third runway, a satellite and a second terminal, increasing capacity to 110 million passengers.
EYES ON DUTY-FREE AUCTION
Another source of revenue for the firm are fees from duty-free and commercial concessions, which is currently held by King Power in a single concession set to expire in 2020.
AOT’s non-aeronautical revenue in its second quarter came in at 7 billion baht, mostly from concessions, making up 43 percent of total revenue.
Nitinai expects the terms of the auction to be finalised and bidding to start between July and August with a winner by December.
As a state-owned enterprise, there can be “limitations to efficiency and transparency,” said Managing Director of CLSA Securities (Thailand), Prinn Panitchpakdi, adding that governance could improve.
The Thai government holds a 70 percent stake in AOT.
Investors hope the upcoming bidding to be fair and transparent to maximize benefits to shareholders, Prinn said.
A Thai retail industry group has recommended the auction be in multiple concessions.
Last year, a 10-year duty free concession in the low-cost airport, Don Muang, was granted to King Power.
Courts are looking into allegations against AOT and King Power. The suit accuses King Power of failing to pay the Thai government 14 billion baht from the operation of the airport franchise it was granted in 2006.
($1 = 31.9200 baht)
Editing by David Evans