Bangkok--4 Dec--Fitch Ratings
Fitch Ratings (Thailand) Limited has affirmed Bangkok Aviation Fuel Services Public Company Limited's (BAFS) National Long-Term Rating at 'A+(tha)' and its National Short-Term Rating at 'F1(tha)'. The Outlook is Stable.
KEY RATING DRIVERS
Dominant Market Position: The ratings of BAFS reflect its dominant position in Thailand's aviation fuel service market. BAFS is the sole operator of the fuel depot and hydrant network at Suvarnabhumi Airport, the country's largest international airport, and also the largest into-plane fuelling service provider at the airport with a market share of about 87%. The company faces limited competition, and benefits from high barriers to entry, such as a requirement that operators work under concessions from the airport.
Continued Demand Growth: Fitch expects BAFS's uplift volume (the amount of fuel supplied to aircraft) to continue growing in 2014-2015, supported by local and regional economic growth. Besides Suvarnabhumi, BAFS is also the sole aviation refuelling service provider at Don Mueang Airport. Uplift volume at Don Mueang has increased sharply since October 2012, when most of the budget airlines operating at Suvarnabhumi started to relocate to Don Mueang. The airport operator also plans to increase the capacity of Don Mueang to provide full regional services. The first phase of the plan, the renovation of an existing international terminal that is currently not in use, is expected to be completed in May 2014.
Limited Exposure to Oil Prices: BAFS is insulated from the volatility of fuel prices because its revenue is derived solely from fuelling service fees, while fuel is sold by oil companies to airlines. BAFS's major cost is its pre-agreed concession fee, which means that profitability is quite stable.
Large Rating Headroom: BAFS's current credit metrics provide significant rating headroom to support additional capex or new investment in the medium term. BAFS is likely to maintain its funds flow from operations (FFO) adjusted net leverage at below 2.0x over the next two years, despite a significant increase in capex for the hydrant network system for the expansion phase of Suvarnabhumi Airport.
RATING SENSITIVITIES
Positive: Future developments that may, individually or collectively, lead to positive rating
action include:
- Larger operating scale and more diversity of operations, though both of which are unlikely over the next 12 to 18 months
Negative: Future developments that may, individually or collectively, lead to negative rating
action include:
- Larger-than-expected debt-funded investments, or high dividend payouts, leading to an increase in FFO-adjusted net leverage to above 2.0x on a sustained basis