Airlines, airports, and tourism-related industries fight for survival amid coronavirus outbreak

Standing alone staring at the flickering screen of arriving flights, Noi, the Starbucks barista at the arrivals hall at Don Mueang (DMK) Airport seems surprised when I walk up to her to order a coffee.

“Sorry ka Phi (elder brother), I did not expect anyone for the minute or so I walked to look at the screen to check on which flights were coming in today,” she said when asked why was she so concerned about looking at the screen beside the Starbucks shop of the once bustling airport.

Noi is not alone in the lookout for customers at Don Mueang; all the shops at the arrivals hall are dead quiet. The handful of passengers arriving are approached by store employees as the tourism crunch bites Thailand.

Data from Don Mueang Airport shows that international arrivals into Don Mueang have fallen by as much as 70 per cent. For the likes of Noi and Junior (a SIM card salesman for Advanced Info Services at the arrivals hall), it feels more like 90 per cent.

That may not be so far from reality as flights into Bangkok – one of the key transit points for tourists – have seen a sharp dip in the number of arrivals at both Don Mueang and Suvarnabhumi airports.

Fight for survival

Both Noi and Junior are lucky to be in the job they say, adding that they are working for strong companies, but some of their part-time colleagues have not been so lucky and have been let go.

“It pains me to see that our part-time friends have had to go. What kind of job will they be able to find in this market?” Noi questions.

The assurance that she and Junior, as full-time employees, are safe stems from the fact that both Starbucks (Thailand) and Advanced Info have very strong balance sheets and shareholders.

In mid-2019, Starbucks (Thailand) paid a handsome US$500 million to acquire the 372 branches of Starbucks in Thailand, thus pushing Thailand’s second richest family – the Sirivadhanabhakdi family, into the food and beverage industry.

Advanced Info Services Plc (AIS) is the country’s largest mobile phone operator and is majority owned by Singapore’s SingTel through its holding company Intouch Holdings Plc.

The sense of job security from the strength of these companies overshadows the other stores there, such as the smaller shops selling souvenirs for departing tourists at the departure lounge.

Airlines suffering

It is not just the shop keepers who are suffering, the airline industry is in shambles. Airlines all around the world have been cutting back on the number of flights they operate in order to keep their costs low and withstand the sharp decline in the industry, which may last for months to come.

A Scoot flight from Singapore to Bangkok had a mere 34 passengers aboard the entire Boeing 787 that can seat up to 375 passengers.

“I have never seen such a low number of passengers in my life,” a Scoot flight attendant said when asked if this had become the norm. The flight attendant, who declined to be named, said he hoped that the return flight would have a higher number of passengers; otherwise using such a big aircraft would be a waste of resources.

Airlines, along with Airports of Thailand Plc (AOT) are facing one of the most severe crises since 9/11.

The International Air Transport Association (IATA) has come out with a report suggesting that, as of now, the global airline industry needs the support of as much as US$200 billion to be able to survive this catastrophic virus outbreak that has grounded many planes and forced airlines to operate at less than half their capacity.

AOT has also seen its workers fear for what may lay ahead for them going forward. It is not just the airlines but also companies that are heavily focused on the tourism sector that are suffering.

Minor International Plc (MINT) has seen its share price tank to nearly 60 per cent of its value since the start of this year when it was trading at 36 baht a piece. Currently trading at a mere 14.50 baht, MINT is feeling the brunt of the impact from the virus as its hotel business, which accounts for a big bulk of its revenues, has started to suffer all across the world amid the falling tourism numbers.

MINT’s big gamble to buy out 385 hotels under the NH brand in Europe about a year ago by pumping in billions of dollars is starting to feel the pinch of the impact of the Covid-19 crisis as NH’s biggest market – Spain – is under a total lockdown amid the rising spread of the virus. Other European countries where NH has a wide presence has faced similar lockdowns.

The fear of the spread of the virus is also having an impact on the number of customers who visit the various quick service restaurants (QSR), which is another arm of MINT. Although Thailand continues to remain in stage 2, the rising number of patients could possibly push the country to stage 3, which would kill the QSR sector, thus impacting MINT even further.

Other hotels such as Central Plaza Hotels Plc (CENTEL) has also lost as much as 56 per cent of its value so far this year with the shares trading at 14 baht a piece from 25 baht at the start of this year.

Share by share

Avin Sony, head of Institutional Sales at Asia Plus Securities told Thai Enquirer that the main concern for Minor right now is its investment the NH brand, which is not making money right now and they have bought it for a “very high price”. The outbreak is also impacting its revenues from the food business. 

“This is a perfect storm for Minor,” he said.

On top of that, there are concerns over their balance sheet as they borrowed a lot of money for the NH purchase and they have also issued a perpetual bond for the refinancing of the loan, which means that they will be “very tight on the cash flow” at the moment.

For AOT, the next potential point to look at is whether the government will reduce the landing fees. On Thursday, its board proposed relief measures to help airlines cope with the reduced number of passengers. 

This includes a 50 per cent cut on landing fees and parking fees for domestic and international flights to and from countries that have been severely affected by the outbreak. The measures will have to be approved by the cabinet next week.

“If they reduce the landing fees by 30-50 per cent, that on its own will be another significant downward look for its earnings,” he said. 

Sony said most people have been buying AOT because they believe that since it is a one-player market, they will bounce back very quickly once the outbreak is contained and passengers start to return. But it is hard to see the bottom for AOT right now.

For CENTEL, the empty department stores will affect the subsidiaries of Central Retail Corporation (CRC) and Central Pattana (CPN). But since CENTEL is mainly in Thailand and the Maldives, that could be good news for them. 

Sony explained that this year was supposed to be a very bad year for CENTEL because of the outbreak, but they will benefit from the government’s tax measures. At the same time, since the share prices have come down significantly, their shares are actually in one of the best positions if it comes back.

“CENTEL might actually be in a good position in terms of its share price, as they took such a big hit where it actually came down from 60 baht,” he said. 

CENTEL was trading at 14 baht as of 4:00pm on Thursday.

“From the share price angle, which is already very low, it may be interesting but then again, it will be in a later stage,” he added.

Advanced Info Service (ADVANC) is likely to benefit from more people staying at home because of the outbreak, Sony said. The company just came out with a home internet package to support people working from home and increased internet usage. 

“Anyone who has a bad internet package is now improving, so the entire sector is very interesting at the moment, where ADVANC and its parent INTUCH stand out,” he said. “They stand out because DTAC and TRUE were already up before this,” he added.

ADVANC’s share price went up by 5.3 per cent on Thursday to 189.5 baht. Total Access Communication (DTAC) was up by 12.9 per cent at 35 baht, while TRUE also traded up by 11.5 per cent to 3.1 baht as of 4:00pm.

Other benefactors are shares of retailers, as people are panic buying food and consumer products. But this will only be in the short-term, where CPALL is not performing but Berli Jucker (BJC) is already out performing as they dropped quite considerably before. 

BJC’s stock traded up by 6.1 per cent to 39 baht on Thursday, while CPALL traded down by 0.4 per cent to 59.75 baht. 

Sony recommended buying ADVANC as there is no downside at the moment. He also recommended to hold for both MINT and CENTEL because the outbreak still ongoing, and hold for AOT until they reduce landing fees, which could be the day to buy for the long-term.

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