Bangkok--2 Aug--TRIS Rating
TRIS Rating Co., Ltd. has affirmed the company rating of Aeronautical Radio of Thailand Ltd. (AEROTHAI) at “AA” with “stable” outlook. The rating reflects the strategic importance of air traffic control to the country, AEROTHAI’s status as the only air traffic control provider in Thailand, and its capable and experienced management team. The rating also reflects increasing demand for air transportation in the Asia-Pacific region in the medium to long term, which is expected to improve AEROTHAI’s cash generation in the future. In addition, implicit support from the government is a major factor enhancing
the company’s credit profile. These strengths are partially offset by the recent deterioration in cash flow protection due to an increased gearing ratio, which will remain high because of the substantial investment requirement at the Suvarnabhumi Airport .
The “stable” outlook is based on the expectation of continued support from the government because of AEROTHAI’s status as the nation’s sole air traffic control operator, its strong operating profile, and improving internal cash generation. AEROTHAI’s outlook and/or rating will be revised after operations at the new airport are running smoothly and the company is able to improve its financial profile.
TRIS Rating reported that AEROTHAI is a state enterprise, 91% owned by the government, the remaining 9% is held by airlines. The Thai government, as a member of the International Civil Aviation Organization (ICAO), is responsible for providing air transportation safety over Thailand. AEROTHAI has been appointed by the government to operate the country’s air traffic control service and aeronautical telecommunication services, which are critical functions for air transportation safety. Currently, AEROTHAI is the sole provider of Thailand’s air traffic services. The company’s responsibility area is the Bangkok Flight Information Region (BKK FIR). Its operations comply with international practices, which are set by the ICAO. AEROTHAI’s operation is heavily influenced by government policy and the company’s investments are approved by the Ministry of Transport and the Cabinet. All budgets are approved by the Board of Directors, which mostly consists of representatives from the Ministry of Finance, the Ministry of Transport, and the Royal Thai Air Force.
The government appoints nine of the eleven board members, while two members are representatives from airline share-
holders. AEROTHAI’s air service charges must be approved by the Civil Aviation Board.
TRIS Rating said that AEROTHAI incured substantial debt-financed capital expenditures during 2000-2006, with funds earmarked for the construction of a new air traffic control complex and air traffic control system at Suvarnabhumi Airport. The total investment cost for facilities at the new airport is approximately Bt3,110 million. AEROTHAI’s total debt to capitalization ratio, therefore, will surpass 80% in 2006. The funds from operations (FFO) to total debt ratio is likely to deteriorate even
though the company is expected to achieve strong operating performance. Although AEROTHAI’s financial status will weaken in the short term, the company maintains a strong credit profile because government support enhances its creditworthiness.