Thai Airways is for the second time this year seeking advice as to whether or not it should remain within the Star Alliance group of airlines.The carrier has this time appointed an aviation industry consultant after earlier in the year seeking the opinion of financial advisers Credit Suisse First Boston (CSFB). CSFB was appointed more than a year ago to handle the planned sale of a 23% stake in the airline by the Thai government.
Thai Airways had originally sought CSFB's advice in order to ascertain how Singapore Airlines' (SIA) membership of Star Alliance might affect the stake sale, involving an initial public offering of a 13% interest and 10% being sold to a foreign strategic partner. Since SIA joined Star Alliance early last month, Thai Airways has affirmed it plans to remain within the airline group, of which it is a founder member.
Reopening the door to other alliances is a move designed to heighten interest among potential strategic investors. "What this is doing now is trying to hype Thai Aiways' stock," says Jim Eckes, managing director of Indoswiss Aviation. "Thai Airways is doing everything possible to get that stock to a pretty decent level," he adds. Thai Airways' shares today closed at Bt37.75 and the Thai government is reported to be unwilling to dispose of any of its holding below Bt55. In the past, the government has been unwilling to proceed with any sale below Bt60 - the level at which it floated a 7% stake in 1992. In addition, for the sale to a foreign party, exchange rate considerations will come into play. A Thai Airways spokesperson says the sale to a strategic partner will not go ahead if the baht is weaker than 40 against the US dollar. In late trade, the Thai currency was trading at 39.35 versus the US dollar.
To date, the Air France-Delta Airlines alliance, Swissair, British Airways and Star Alliance have all expressed an interest in acquiring the 10% stake in Thai Airways earmarked for sale by the Thai government. Air France has reportedly gone so far as to assure Thai Airways that Bangkok would be the only southeast Asia hub in its alliance.
Thai Airways has obvious attractions for airline alliances. Thailand has a population of 70 million people, it is expecting almost 9 million tourists this year and the country is centrally located within Asia. Of the possible strategic investors, however, it is hard to see how any can better the benefits Thai Airways currently enjoys as part of Star Alliance, the world's biggest group of airlines. Furthermore, Thai Airways has made it clear it does not want any partner playing a managerial role and the airline's president, Thamnoon Wanglee, has already spoken out in favour of Star Alliance. "I think the benefits of Thai remaining within Star Alliance outweigh the benefits of their jumping ship and joining another alliance," says Eckes.
Although the Thai government and Thai Airways are keen to generate investor interest in the latter's shares, any stake sale, particularly to a foreign partner is still months away. A spokesperson for the airline said Thamnoon is still aiming for a strategic partner to be aboard by end-December, but analysts are sceptical this will happen. A Thai general election is scheduled for the final quarter of this year and this will likely push the government's privatisation plans through to the first half of 2001, they say.
