Airports of Thailand (AOT) jumped Bt1.50 to the day's peak of Bt55.50 shortly after the curtain was raised, before weakening to close at Bt54.50, Bangkok Aviation Fuel Services (BAFS) closed almost 3 per cent higher at Bt10.50, and Thai Airways International (THAI) slid 1.12 per cent to Bt44.

Thanachart Securities has recommended "sell" on AOT shares, because it believes operating both Don Muang and Suvarnabhumi airports will increase the company's costs.

The broker said if Don Muang reopened, AOT would have to hire 300 additional staff, and its costs would be pushed up by 7 per cent year on year in the company's fiscal 2007, which ends on September 30.

The broker said its estimated costs did not take into account that of machinery, equipment and facilities.

Although Suvarnabhumi Airport's opening had made AOT a more attractive investment, its shares have declined below the broker's target price, and the broker is recommending that investors sell the stock, due to a spate of negative news and the possibility that the airport operator will post poor first-quarter earnings.

KGI Securities (Thailand) has reiterated its "underperform" rating on AOT shares.

It said the broader use of Don Muang airport might signal a better use of AOT's existing facilities. However, authorities have warned that one of Suvarnabhumi's runways might have to be temporarily closed to repair cracks on the taxiway, and if it does, then the company's overall capacity will diminish.

Based on the scenario that Suvarnabhumi closes, and all flights move to Don Muang, AOT's earnings for its fiscal 2007 would shrink to Bt813 million, down 62 per cent from the broker's current projection, while its operating expenses would increase.

The broker's forecast model indicates that AOT may suffer a Bt1-billion loss for its fiscal 2007 if one runway at Suvarnabhumi is closed for repairs.

Although airport contractor ITO is currently in charge of taxiway and runway repairs, ITO's construction guarantee expires on August 2, and AOT's all-risk insurance (with Dhipaya Insurance) will then kick in, and this could mean a higher insurance premium in the future, said the brokerage.

Even worse, if investigations determine that the problems were not the contractors' fault, AOT might become responsible for all repair costs.

Kim Eng Securities said the return to Don Muang would be a positive move for BAFS, because both the old and the new airports would enable flight frequencies to expand, boosting the company's uplift volume.

Furthermore, BAFS will not book an impairment on assets of Bt40 million to Bt50 million until after the move to the new airport. The company has not yet moved to Suvarnabhumi.

A Kiatnakin Securities analyst called the reopening of Don Muang Airport will be a blessing for THAI, because it is more convenient to reach Don Muang than Suvarnabhumi.

Some THAI international flights and most of its domestic flights will probably return to Don Muang.

The analyst said in the worst-case scenario, THAI would carry higher costs amounting to hundreds of millions of baht, which was a minimal figure compared with the company's overall costs.

The broker has recommended "buy" on THAI shares, with a target price for this year of Bt51 apiece.

Oranan Paweewun

The Nation