Thailand gets aviation safety upgrade, airline shares jump

Aukkarapon Niyomyat and Wirat Buranakanokthanasan, Reuters

Posted at Oct 09 2017 03:07 PM

A Thai Airways Boeing 787-9 is shown in this photo from Thai Airways' Twitter page.

BANGKOK - The UN International Civil Aviation Organization has removed a red flag against Thailand over safety concerns, the Civil Aviation Authority of Thailand said on Monday, sending shares in Thai airlines sharply higher.

Thailand was downgraded in June 2015 after its regulator missed a deadline to resolve significant safety concerns, meaning that airlines in Thailand were unable to add further international routes, though they could continue to operate routine flights.

The Thai aviation authority said the ICAO had made the decision after a meeting on Friday. The Montreal-based UN agency was not immediately available for comment, but the red flag which appeared against Thailand on its website had disappeared.

"Although lifting the red flag is a significant turning point for her aviation industry, Thailand as well as CAAT need to carry on their missions to improve the aviation safety standards," the CAAT said on its website.

CAAT director general Chula Sukmanop told a news conference the removal of the red flag would give Thai airlines a chance to start new flights to China, Japan and South Korea.

Shares in Thai Airways climbed nearly 8 percent on the news before falling back to trade at over 5 percent higher. Shares in Asia Aviation, which operates as Thai Air Asia, rose as much as 5 percent and later traded up nearly 4 percent. Shares in airport operator Airports of Thailand rose over 2 percent.

The biggest beneficiaries of the decision would be smaller carriers, such as Thai AirAsia X, NokScoot and Thai Lion, said Corrine Png, the CEO of Singapore-based transport research firm Crucial Perspective.

"The ICAO downgrade had seriously impeded these new entrants’ growth to lucrative markets such as Japan and South Korea," she said. "These airlines can now grow more aggressively. This would, however, imply increased competition for Thai Airways when they expand."

Chula said he expected Thailand would regain a Category One status from the US Department of Transportation’s Federal Aviation Administration (FAA), which also downgraded Thailand in 2015. The FAA downgrade meant Thai carriers could not start new routes to the United States.

The CAAT said its aim was to be at "the world's forefront" in safety and reach the global average in each safety category. Actions were still needed to address findings of an ICAO inspection in January 2015 and an audit in July, it said.

ICAO's red flag was based on its audit of the regulatory body, rather than individual airlines. Some major Thai airlines, including Thai Airways, Bangkok Airways, Thai Lion and NokScoot, have passed the International Air Transport Association Operational Safety Audit, a benchmark for global safety management in airlines.

Aviation safety is particularly important for Thailand given that tourism accounts for around 12 percent of its economy, the second largest in Asia.

The countries which still have red flags against them are Djibouti, Eritrea, Haiti, Kyrgyzstan and Malawi, according to the ICAO list.