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Here's how Airports of Thailand (AOT) may benefit from visa requirement waivers

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By Gerald Wong, CFA • 29 Feb 2024 • 0 min read

The number of tourist arrivals into Thailand in 2023 more than doubled from the previous year. Here's how the latest visa requirement waivers may drive further traffic growth and benefit Airports of Thailand (AOT).

airports of thailand february 2024

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What happened?

Tourists are returning to Thailand once again.

The total amount of tourist arrivals into Thailand reached 28 million in 2023, more than doubling from the 11.5 million arrivals in 2022. 

However, they remain below its peak of 40 million in 2019. 

The government is targeting 35 million foreign arrivals this year, an increase of 25% from 2023. 

As the operator of six major airports in Thailand accounting for over 80% of Thailand’s air traffic, Airports of Thailand (AOT) has seen its earnings recover in fiscal year 2023 with a pickup in travel demand.

Let us look at some of the factors that may impact AOT’s share price in 2024. 

#1 – AOT’s earnings have recovered further in most recent quarter

AOT reported a further improvement in revenue in the first quarter of fiscal year 2024.

Its revenue more than doubled to Bt 15.7 billion when compared to the previous year. Compared to the previous quarter, AOT’s revenue also rose by 2.2% as the higher air traffic led to an increase in passenger service charges. 

This was partly offset by a decline in its non-aeronautical revenue due to a one-time adjustment in office and state property rents in the previous quarter. 

aot revenue recovered Q12024

With the increase in revenue, AOT’s profit rose to Bt 4.6 billion in the first quarter of fiscal year 2024. This also marks the highest quarterly profit since the Covid-19 pandemic. 

While the recovery in tourist arrivals helped to support AOT’s profit, this was partly offset by higher depreciation charges with the launch of Satellite-1 (SAT-1) terminal at the Suvarnabhumi Airport in September 2023.

aot net profit recovered Q12024

#2 - Increasing tourist arrivals

In 2023, number of Chinese arrivals of 3.5 million is only 32% of its peak in 2019.

The number of Chinese arrivals was below expectations through 2023 due to China’s economic slowdown, limited flight availability, and concerns about safety issues.

The momentum of Chinese tourist arrivals, however, has improved towards the end of the year by reaching 49% of 2019’s arrivals in December. 

The recovery trend is expected to continue in 1Q24 supported by the visa waiver policy which has been effective since late September.

The visa waiver has been extended with a permanent mutual visa-waiver agreement that will take effect on 1st March. 

Thailand’s Ministry of Tourism and Sports expects the reciprocal visa-free scheme will attract about 8 million Chinese visitors in 2024.

This would be significantly higher than the 3.5 million visitors in 2023, but still lower than the 11 million visitors in 2019.

increasing chinese tourist arrivals in thailand

Tourist arrivals from other countries besides China have improved to 85% of 2019’s level. The momentum continued so far in January 2024. 

This helps diversify the risks of AOT in case the return of Chinese tourists is slower-than-expected.

thailand tourist arrivals expected to recover

#3 – Concession revenue from King Power Duty-Free may also benefit from higher tourist arrivals

Non-Aeronautical revenue accounted for 54% of AOT’s revenue in 2023. 

aot's fy23 revenue breakdown

This includes concession revenue (from Duty Free, Food & Beverages, Airline Catering, etc.), service revenue, and property rental revenue. 

During Covid-19, the concession revenue from King Power Duty-Free has been restructured from a fixed amount of payment to a variable amount that linked to the number of tourist arrivals. 

With the change, AOT’s revenue and profit are expected to be more sensitive to the number of tourist arrivals, even more so than in the pre-COVID period. 

aot's non-aeronautical revenue recovered

#4 – Capacity increases 

AOT’s capacity will increase after the launch of Satellite-1 (SAT-1) terminal at the Suvarnabhumi Airport in September 2023 and the upcoming start of the third runway. 

SAT-1 increases Suvarnabhumi Airport’s capacity by 15 million passengers per year, an increase of 33% from its current capacity. 

AOT’s third Runway at the Suvarnabhumi Airport is scheduled to open in July. Suvarnabhumi Airport is currently having 2 runways in operation, and the third runway will increase its capacity by 40%.

In addition to the six major airports it is running, AOT will also take over the management of three more airports, including the Krabi International Airport and two other airports in the northeastern part of Thailand. 

DescriptionInvestment cost (THB Billion)Completion YearAdditional Capacity
Suvarnabhumi Phase II (SAT-1)62.50202315 million annual passengers
Suvarnabhumi Third Runway 28.05202326 aircraft per hour
Suvarnabhumi North Expansion41.26202830 million annual passengers
Don Muang Phase II36.83202910 million annual passengers

#5 - Potential increase in Passenger Service Charge (PSC)

To fund the investments for its expansion, AOT is preparing a new proposal to the government to increase its Passenger Service Charge (PSC). 

The increases are anticipated to be Bt900 (from Bt700) for international travellers and Bt150-200 (from Bt100) for domestic travellers. 

The increase is subject to government approval, which may come through in 2025 rather than in 2024. 

What are the risks of AOT?

Risks to AOT are disappointment in the number of tourist arrivals as a result of a global economic slowdown (especially in China), political unrest in Thailand, or further changes to the Duty Free Revenue Sharing scheme. 

Beyond 2024, risks may come from the government’s decision to disapprove the proposed plan to increase PSC.

What would Beansprout do? 

Based on consensus expectations, AOT’s revenue is expected to increase driven by the potential rise in Chinese tourist arrival upon the permanent waiver of visa requirement. 

AOT’s revenue is also sensitive to the higher tourists’ spending at the Duty Free through collection of concession revenue. 

In the medium term, revenue upside is possible from the recently-competed capacity expansions and the proposed increase in Passenger Service Charge. 

In addition, dividend payment has been re-instated in FY2023 after the omission during FY2021 and FY2022. 

Based on its current share price, AOT is trading on a P/E of 38.5x on FY24 consensus earnings forecast and a dividend yield of 1.4%

The AOT Thai SDR trades on the SGX under the stock code TATD.

SDRs are tradable by all investor types, as they are classified as Excluded Investment Products (EIP). While this product is available to anyone with a basic understanding of financial instruments, do make sure that you are aware of the product characteristics and risks before you invest in it. 

You will be able to buy Singapore Depository Receipts directly through a stock trading platform which offers trading on the Singapore Exchange. 

Click here to read our earlier article explaining what are Singapore Depository Receipts.  You can also find more resources on the SGX product page.

This article was first published on 29 February 2024 .

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