The Bangkok Post reported yesterday that the board of Airports of Thailand (AOT) has approved massive discounts on airport fees in a move to attract airlines to Don Muang airport in Bangkok from the already congested Suvarnabhumi Airport, whose utilization has exceeded its designed capacity. Discounts of 95% on take-off, landing and hangar fees at Don Muang airport will be offered over the period when repairs are in progress at Suvarnabhumi Airport's runway up to October 2012. Subsequently, the discounts will be at 30%, 20%, 10% every year for the next 3 years. AOT is banking on getting AirAsia to shift its operations given the magnitude of its traffic, with a projected 8 million passengers this year. Airlines intending to shift to Don Muang may start operations there in August, as the airport can handle 36.5m passengers annually.

A big positive. This piece of news will be positive for the AirAsia group, notably Thai AirAsia. The move is expected to significantly boost both AirAsia and its associate companies' combined earnings, especially given the hefty 95% discount over a 2-month period up to October. We expect a boost in earnings of RM30m to RM35m (3% of our 2012 earnings forecast) for the Group overall, of which 80%+ will be contributed by Thai AirAsia.

Maintain BUY. However, we make no changes to our earnings for now, pending confirmation that Thai AirAsia will shift its operations to Don Muang, a move we think is highly likely given the severity of traffic congestion at Suvarnabhumi Airport, where the utilization rate has hit 104% of its annual 45m passenger capacity. We maintain our BUY call on AirAsia, with our fair value of RM4.57 unchanged, premised on a 12x PE.

Source: OSK