Aot Business Analysis Project

MF610: Financial Analysis I: Financial Reporting                                                                                     Assistant Professor Kulaya Jantadej, Ph.D. 

Table of Contents

Overview 4

Business Strategy Analysis 4

Industry Analysis5

Five Forces Model Analysis6

Competitive Strategy Analysis5

Key Success Factor for Airport Industry6

Value Chain Analysis 6

Corporate Strategy Analysis5

Accounting Analysis1

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Financial Analysis1

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Forecasting and valuation1

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Appendix1

Appendix12

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Appendix22

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Appendix32

Overview

Airports of Thailand Public Company Limited (AOT or 'the company') is a Thailand based airport business operator engaged in providing management, operations and development of international airports. The company operates six international airports, including Suvarnabhumi Airport, Don Mueang International Airport, Chiang Mai International Airport, Hat Yai International Airport, Phuket International Airport, and Mae Fah Luang-Chiang Rai International Airport. The company dominates 85-86% Market shares of industry within Thailand.  

In addition, AOT, through its subsidiaries and associates, is engaged in hotel business, duty free retail, hydrant dispenser aircraft refueling service, airline catering services, electronic information exchange service, cargo depot service, aircraft parking area service and aircraft maintenance services.

The Thai Ministry of Finance is the major shareholder with a 70% stake in AOT, while the remainder is held by institutes and retail investors.

AOT's main revenue derives from: (a) aeronautical revenue, which is 57% of total revenue consisting of landing charge, parking charge, passenger service charge and aircraft service charge. The majority of aeronautical revenues are passenger service charges. (b) Non- aeronautical revenue is 43% of total revenue consisting of concession revenue, office and real property rents and service revenues. The majority of non-aeronautical revenues are concession revenues. In the management of airport operations, AOT has to acquire external operators to provide some required ground services for passengers as agreed under contracts with AOT. Operators of retail shops, warehouse facilities, limousines, parking services and other conveniences have to pay for concession fees, rent and service charges. Other non-contract tenants running services within AOT airports pay rent and service charges to the AOT.

In FY2016, the Company reported revenues of 50,961.95 million Baht, an increase of 15.9% over FY2015. The company also recorded a net margin of 38.4%. AOT served 131 scheduled airlines, which included 123 mixed passenger-cargo airlines, and 8 cargo airlines. The total number of employee employed is 6,810. Air traffic volume at six AOT airports are 776,922 flights, consisting of 402,721 international flights and 374,201 domestic flights. The airports handled about 119,923,998 passengers, which included 68,066,701 international passengers and 51,857,297 domestic passengers. Further, the total volume of freight and parcels were 1,407,507 tons, which comprised of 1,283,802 tons of international freight and 123,705 tons of domestic freight.

The overall aviation industry of Thailand during October 2015 - September 2016 improved comparing to the same period last year because the domestic political situation is stable, together with the impact of the drop of fuel prices. Furthermore, the government’s policy to stimulate tourism both domestically and internationally led to an increase in tourists, Especially, Chinese visitors, showing a significant impact on Thailand’s tourism industry. In addition, the expansion of low cost airlines, with their competitive pricing, increased new demand of air travelling for middle-income group. All of these were factors in the positive results for both the aviation industry and the overall domestic economy. 

According to industry estimates, air travel to, from, and within the South Asian region is projected to grow at an annual average of 8.3% over the next 20 years. Air traffic within the region is expected to grow by 9.9% annually. Thus, the expanding Southern Asian Airline industry will support the company's future business growth.

The domestic political situation is stable. The economic is stimulated, the tourism sector is expanding, and fuel prices are decreasing. These factors will increase the demand for air travel and have positive impact for the domestic aviation industry especially the continuous growth of low cost airlines.

Industry Analysis (Five Forces)

Rivalry among existing firms 

        In Thailand there are 38 airport and 28 out of it is belong to department of airport (DOA) and 1 is belong to royal Thai navy so there are only 9 airport that is run by public company. 6 out of 9 Airport is operated by AOT and 3 out of 6 are operated by Bangkok airways so the main competitor of AOT is Bangkok airways. But Bangkok airways has no airport in Bangkok which is the main hub of Southeast Asia that why we think AOT is in monopolistic business. We think the competition in airport is low and profitability is high. And from the analysis of industry life cycle model, airport industry in Thailand is still in the growth stage as the numbers of aircraft movements, number of passengers and cargo volumes that increasing almost every year since 2007. We expect this trend will continue as emerging market and developing economy still growing. From the reasons above, we conclude that rivalry among existing firms is low.