Lure of Azure Waters and Bangkok Nightlife Strains Thai Airports

(Bloomberg) -- Thailand’s tourism bounty comes with a big challenge for the head of state-run Airports of Thailand Pcl: expanding passenger capacity in Bangkok by about the size of South Korea’s population.

The company is planning for 90 million passengers annually at the city’s main Suvarnabhumi Airport by 2022 and 40 million at Bangkok’s low-cost hub Don Mueang International Airport, up from the present combined capacity of 75 million, President Nitinai Sirismatthakarn said. The firm operates four other airports, including in tourism hot-spot Phuket.

"We’re about to invest in 10 years about $6 billion for our six airports," Nitinai said in a June 22 interview in Bangkok. The plan for Suvarnabhumi includes adding a concourse to the existing terminal complex by 2020, a third runway the following year and a new international terminal in 2022, he said.

Growth in tourism is a bright spot for Thailand’s economy, putting pressure on one of Asia’s biggest airport operators to ensure infrastructure keeps pace. The company’s operating profit could be 50 percent higher in 2020 as new commercial and aircraft facilities are put in place, according to Bloomberg Intelligence.

Airports of Thailand’s shares have climbed 18 percent this year, exceeding the benchmark SET index’s 3 percent advance. They trade at 28.7 times estimated 12-month earnings, compared with a five-year average of 22.5 times.

The company stands to benefit from Thailand’s position as one of the world’s top travel destinations, but it will take some time before the expanded infrastructure is in place to fully tap these opportunities, said Amnart Ngosawang, an analyst at KTB Securities (Thailand) Co. in Bangkok.

"The current share price offers very limited upside for investors," Amnart said. "The fundamentals are strong, but valuation is quite expensive now.”

The goal of 90 million passengers at Suvarnabhumi in five years would double its current capacity, Nitinai said. Changi Airport in Singapore has capacity for about 60 million annually, while Beijing Capital International Airport can accommodate over 90 million. Both the city-state and China’s capital are also expanding their airports.

The extra concourse at Suvarnabhumi -- also called a satellite terminal -- would take capacity to 60 million and "just catch up with current demand" since the airport is handling more people than it’s designed for, Nitinai said. The planned new international terminal will add another 30 million.

Doubling the airport’s capacity should be sufficient, Nitinai said.

Thailand’s military government is trying to accelerate infrastructure projects to bolster Southeast Asia’s second-largest economy. Airport expansion is especially important as tourism accounts for 18 percent of gross domestic product, with foreign visitors responsible for the bulk of the income.

--With assistance from Supunnabul Suwannakij Anuchit Nguyen Lee Miller and Sam Nagarajan

To contact the reporter on this story: Sunil Jagtiani in Bangkok at sjagtiani@bloomberg.net.

To contact the editors responsible for this story: Linus Chua at lchua@bloomberg.net, Anand Krishnamoorthy at anandk@bloomberg.net, Lena Lee