Thai Airline Shares Take-off after Removal of International Civil Aviation Red Flag

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BANGKOK  – Thai airlines can now add flights to the growing China, South Korea and Japan markets after the U.N. International Civil Aviation Organization removed a red flag against Thailand over safety concerns, officials said on Monday.

Thailand was downgraded in June 2015 after its regulator missed a deadline to resolve significant safety concerns, meaning that airlines were unable to add further international routes, though they could continue to operate routine flights.

The Civil Aviation Authority of Thailand (CAAT) said the ICAO had made the decision after a meeting on Friday. The Montreal-based U.N. agency was not immediately available for comment, but the red flag which appeared against Thailand on its website had disappeared.

“Although lifting the red flag is a significant turning point for her aviation industry, Thailand as well as CAAT need to carry on their missions to improve the aviation safety standards,” the CAAT said on its website.

AIRLINE SHARES JUMP

Shares in Thai Airways climbed nearly 8 percent on the news before falling back to trade at over 5 percent higher. Shares in Asia Aviation, which operates as Thai Air Asia, rose as much as 5 percent and later traded up nearly 4 percent. Shares in airport operator Airports of Thailand rose over 2 percent.

The biggest beneficiaries would be smaller carriers, such as Thai AirAsia X, NokScoot and Thai Lion, said Corrine Png, the CEO of Singapore-based transport research firm Crucial Perspective.

“The ICAO downgrade had seriously impeded these new entrants’ growth to lucrative markets such as Japan and South Korea,” she said. “These airlines can now grow more aggressively. This would, however, imply increased competition for Thai Airways when they expand.”

Thai AirAsia X CEO Nadda Buranasiri said his airline was studying new routes, including to Hokkaido in Japan, after the red flag was lifted.

“We will likely increase routes and frequencies for China, South Korea, and Japan,” he told Reuters on Monday, adding Thai AirAsia X now hoped to add three to four aircraft to its fleet next year.

Nok Airlines PCL Vice Chairman Patee Sarasin said new routes would be added as slots became available.

Thai Airways lacks enough aircraft to take advantage of the situation and expects rivals will boost routes to other Asian countries, said a source at the national carrier who declined to be named because he wasn’t authorized to speak to the media. Thai Airways declined to comment.

U.S. YET TO UPGRADE

CAAT director general Chula Sukmanop told a news conference that he expected Thailand would regain a Category One status from the U.S. Department of Transportation’s Federal Aviation Administration (FAA), which also downgraded Thailand in 2015. The FAA downgrade meant Thai carriers could not start new routes to the United States.

The CAAT said its aim was to be at “the world’s forefront” in safety and reach the global average in each safety category. Actions were still needed to address findings of an ICAO inspection in January 2015 and an audit in July, it said.

ICAO’s red flag was based on its audit of the regulatory body, rather than individual airlines. Some major Thai airlines, including Thai Airways, Bangkok Airways, Thai Lion and NokScoot, have passed the International Air Transport Association Operational Safety Audit, a benchmark for global safety management in airlines.

Aviation safety is particularly important for Thailand given that tourism accounts for around 12 percent of its economy, the second largest in Asia.

The countries which still have red flags against them are Djibouti, Eritrea, Haiti, Kyrgyzstan and Malawi, according to the ICAO list.

By Aukkarapon Niyomyat and Wirat Buranakanokthanasan
REUTERS

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Additional reporting by Chayut Setboonsarng in Bangkok and Jamie Freed in Singapore