Kiatnakin Phatra Securities (KKPS) has a slightly positive short-term outlook for Thai Airways International Public Company Limited (SET: THAI) following the firm’s recent analyst meeting, with the company’s management highlighting a notable improvement in forward bookings for March 2026. Bookings are up by six percentage points year-on-year, primarily driven by robust demand on European routes.
The European market remains a key bright spot for THAI, with ticket fares on these routes having doubled compared to last year. Fares on other regional and international routes are also set to increase as a result of rising jet fuel prices. However, the analyst firm expects the impact of higher oil prices to be limited in the short term, as most jet fuel is purchased through weekly and monthly contracts. Significant cost pressures from fuel are likely to materialize starting April 2026.
According to THAI’s management, the company is employing a zero-cost collar hedging strategy tied to Brent crude oil prices. With Brent having surpassed the $70 per barrel ceiling, THAI is currently able to recognize hedging gains. As of 1H26, the airline has hedged 50% of its fuel consumption and 30% for the second half of the year. This strategic hedging provides THAI with a competitive advantage within the region, an edge shared only with Singapore Airlines among major regional carriers.
For 2026, THAI is targeting available seat kilometer (ASK) growth of 5-6%, with passenger yield and cabin factor expected to remain broadly in line with 2025 levels. However, due to escalating maintenance and employee benefit expenses—forecast to rise to approximately 13% of total revenue, up from 11% last year—the company expects its operating profit margin to moderate from 21% to the mid-teens.
Fleet expansion remains a core strategy for THAI in 2026, with plans to increase the number of aircraft from 80 in 2025 to 102, including the addition of 14 wide-body and 14 narrow-body planes. New routes to Amsterdam, Auckland, and various Chinese cities are slated for launch, alongside increased frequency on established Paris and Munich routes.
KKPS has adjusted its 2026 profit forecast for THAI down by 5%, primarily due to the ongoing impact of the war in the Middle East. The base case assumes a resolution in April 2026, but jet fuel cost assumptions have been revised upward from $95 to $107 per barrel. Scenario analysis indicates that a prolonged conflict could erode profits by up to THB 3 billion per month.
In conjunction with these pressures, KKPS has reduced its target price for THAI to THB 8.6, utilizing a target P/E multiple of 9.8x and an EV/EBITDA ratio of 4.6x—each 10% below the regional peer averages (previously discounted by 20%), reflecting THAI’s positioning to benefit from potential Middle East airline disruptions.
Despite the operational improvements and competitive fuel hedging, KKPS maintains a “Neutral” rating on THAI due to the possibility of selling pressure from creditors and lingering uncertainty surrounding the conflict.
