Don't hold your breath for Thai Airways sale

The Thai government has given the thumbs-up to the long-awaited sale of a 23% stake in Thai Airways, but investors are sceptical there will be an offering before the year is out.

The Thai government last week finally approved the sale of a 23% stake in Thai Airways International, but investors remain sceptical an offering is on the horizon.


"Most people have got bored waiting for this transaction," says one analyst, adding that lead manager Credit Suisse First Boston was appointed over a year ago.


The government sold a 7% stake in Thai Airways via an initial public offering at 60 Bt a share in 1992 and has been talking about further reducing its 93% holding almost ever since.


Interference by the Thai military and frequent changes of government have kept sale attempts at bay for much of this time as have pricing concerns, which remain an issue.


The lack of any clear timetable for the planned divestment means investors are likely to be disappointed once again, particularly given that the country is set to hold elections later this yeará- a factor which could lead to a less reform-minded administration taking control.


In the wake of the government's approval of the share sale, transport minister Suthep Thaugsuban says the disposal of a 13% stake to the public and employees would proceed in five or six months and the sale of a 10% stake to a foreign strategic partner in eight or nine months.


Thai Airways president Thamnoon Wanglee says he expects both sales to be completed in just three months.


Although investors are not yet reaching for their wallets, some commentators are hopeful the Thai government will finally make good on its word and offload some of its holding in the airline, something it pledged to do under the terms of a $17.2 billion rescue package agreed in 1997 at the height of the Asian economic crisis.


"My feeling is that they will do at least 10%, if not the entire 23%, in the next four or five months," says Jim Eckes, managing director of industry consultancy Indoswiss Aviation.


A constant barrier to any sale in the past has been the government's reluctance to proceed with any sale for below 60 Bt; a level the shares have failed to attain since the start of this year.


The government's approval of the sale of a 23% stake, comprising 300 million new shares and 100 million existing shares, was reportedly based upon a 55 Bt a share price, against which the stock last traded at 41.50.


Following a strong performance by Thai Airways in the three months ended December, there exist hopes in some quarters two or three airlines may enter into a bidding contest for the 10% interest potentially on offer, possibly transacting at a price approaching the all-important 60 Bt level.


Airlines that have expressed an interest in buying a stake in Thai Airways include Star Alliance partners Lufthansa, United Airlines, Air Canada and Scandinavian Airline Systems as well as British Airways and Qantas from OneWorld, and Swissair.


Swissair and Thai Airways earlierásigned a memorandum of understanding to codeshare on flights between Bangkok and Zurich.