Thai Airways International  has announced a 31.8-per-cent year-on-year fall in its net profit from second-quarter operations in fiscal 2007, and forecasts a further decline in the present quarter.

The airline is blaming the strong baht, high competition in the aviation industry and the current low tourist season for its tumbling bottom line.

As a result of the performance, THAI's board of directors has asked the airline's management to review its existing route network and asset management, with a view to increasing income and reducing expenses.

Management has been instructed to develop greater service quality, in order to ensure total customer satisfaction.

The company announced a net profit of Bt8.2 billion for the first half of fiscal 2007, from October last year to March 31.

This was a fall of Bt1.7 billion, or 17.5 per cent, from the same period in the previous fiscal year.

The company said that in the second quarter of fiscal 2007 (January to March), the airline achieved total revenues of Bt49 billion, up 7.6 percent from the second quarter of fiscal 2006.

However, its operating costs totalled Bt43 billion in the same period, a year-on-year increase of 7.1 per cent.

Its pre-tax profit of Bt6 billion was down Bt2.7 billion from the same period last year, due - the airline said - to the strength of the baht. Its net profit from the second quarter was Bt4.2 billion, a year-on-year fall of Bt1.9 billion, or 31.8 per cent.

Despite the lower net profit, Citigroup Research said THAI was undervalued and provided clean exposure to strong passenger demand while avoiding earnings risks from the weak cargo market.

The research house said the flag carrier's second-quarter net profit fall was due mainly to a 62-per-cent fall in foreign-exchange gains.

Its recurring profit was Bt3.2 billion, down 8 per cent year on year, because of a 296-per-cent increase in non-operating expenses.

Citigroup pointed out that THAI's profitability was improving at the operating level.

Its operating profit rose 11 per cent year on year, led by strong passenger demand and lower fuel prices. Lower staff and marketing costs were offset by the higher costs of using Suvarnabhumi Airport.

THAI's cash balance has nearly doubled year on year to total Bt12 billion, it said.

Net interest expenses have fallen 13 per cent, and the airline's net debt to equity has declined to 91 per cent.

Suchat Sritama

The Nation