BA – The Sole Winner in Aviation Stocks

While other airlines face more or fewer losses in 3Q18, BA is the only one to be able to make a turnaround. What is the strategy behind this boutique airline?

Among aviation stocks, there seem to be only Bangkok Airways Public Company Limited (BA) who managed to turnaround in 3Q18, while the big brother of Thai aviation, Thai Airways International Public Company Limited (THAI) and other low-cost airlines such as AAV and NOK all faced a loss in the third quarter of 2018.

 

In 3Q18, BA turned from ฿157.28 million of loss to gain ฿36.29 million of profit YoY. The revenue was ฿7,066.53 million, compared to ฿6,870.82 million YoY. Its nine-month statement also gained ฿663.83 million, compared to ฿142.52 million of loss YoY, with ฿21,067.31 million in revenue, increased from the same period of last year at ฿20,252.4 million.

What an amazing performance from BA, just like a diamond in the rough. The question is how did BA manage to turnaround?

 

There are two main factors that plunge the revenue of other airlines. First is a high cost of fuel. In 3Q18, the average price of oil crude was 88.90 dollar per barrel, increased from 63.56 dollars per barrel in 3Q17.

Second, the capsizing of Chinese tourist’s boat at Phuket in July that sank the number of Chinese tourists which accounted for 29.3% of the overall foreign tourists by 0.9% in July, 11.8% in August, and 14.4% in September, compared to the same period of last year.

Just like other airlines, the higher oil price hit BA as well. However, the difference between BA and others is that BA focused more on tourists from other countries other than China. Which resulted in a minor loss from lower Chinese tourists when compared to other airlines.

The number of passengers showed that BA’s passengers slightly decreased from 1,526,500 passengers in 3Q17 to 1,460,000 passengers in 3Q18. While its nine-month number showed an increase of passenger from 4,444,900 passengers in 9M17 to 4,483,400 passengers in 9M18.

Moreover, BA is the owner of Samui Airport, Sukhothai Airport and Trat Airport, which accumulated ฿165.7 million of revenue for BA in 3Q18, an increase from ฿165.3 million in 3Q17. Meanwhile, BA’s three airports accounted ฿492.6 million in the first nine months of 2018, increased by 4.8% YoY.

Another strong point is that BA positions itself not as a low-cost airline, but “Boutique Airline,” erasing the competition in fare, along with special-activity packages in the ticket, such as a marathon or a community conservatory, targeting foreign tourists (exclude Chinese). This plan did help BA to be able to sell higher ticket price than other low-cost airlines.

 

The marketing of BA comes from the magnificent vision of Mr. Puttipong Prasarttong-osoth who comes up with strategic plans to offset the high fuel price.

Furthermore, the service of BA’s lounge that serves tea, coffee and snacks to any BA’s passengers whether the economy, business or first class, seems to overwhelmingly satisfy its passengers. The lounge may have been the reason why travellers choose BA over other airlines, especially the legendary Khao Tom Mat (banana with sticky rice) that receives high praise from everyone who has ever tried it.

As for BA’s business, which is in the same group of Bangkok Dusit Medical Services Public Company Limited (BDMS), beside booking dividend from BDMS, the new establishment to further in wellness clinic will also benefit BA as well. The Samui Buri Property Fund that BA has invested in also yields a good amount of profit.

 

These are the supporting reasons that rescue BA from oil price crisis. We need to keep a close eye on BA’s performance in 4Q18, which is the low season of Samui Island and other places in the Gulf of Thailand.