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1. What happen if Bangkok Airways PLC. does not renew the sublease contract?
  • The Fund may terminate the Samui Airport Agreements and find a replacement party to enter into the Samui Airport Agreements to operate the Samui Airport . Until such time as the Fund is able to secure a replacement party and successfully negotiate new Samui Airport Agreements with another party, the Fund’s recourse for payments due under the Samui Airport Agreements will be through enforcement of the Collateral. The Fund also can enforce its rights under the mortgage for losses or damages if the new contract is worse than what the Fund has with Bangkok Airways.
  • If the Fund can not find the new operators, the Fund may assign its rights and/or obligations under the Long Term Lease Agreement to any third party or terminate the major lease contracts and enforce the mortgage for losses or damages.
2. Who is responsible for maintenance cost and capital expenditure?
  • All of maintenance and Capital expenditure costs are paid by Bangkok Airways.
  • To maintain the Leased Assets in good condition or appropriate according to its purpose of use and be capable to support 2,000,000 departing passengers per year, Bangkok Airways shall be responsible for all repairs, whether usual, minor or necessary, for the benefit of the Leased Assets, Equipment, Machinery and Systems and maintain, restore, replace or proceed in any act at Bangkok Airways’ expense.
  • In terms of proceeding in any act which will result in improving the condition of the Leased Assets and Systems, to be capable of supporting over 2,000,000 departing passengers per year during the term of the Long Term Lease Agreement, Bangkok Airways shall give consent to the Fund and/or the new sub-lessee to use such assets without cost during the term of the Long Term Lease Agreement. The Fund agrees to be responsible for costs and expenses which relate to the improved or new Leased Assets or Equipment, Machinery and Systems that enable Samui Airport to support capacity over 2,000,000 departing passengers per year.
  • During the term of the Long Term Lease Agreement, the Fund acknowledges and agrees that Bangkok Airways is entitled to extend, improve, alter, or carry out additional construction on or in the Leased Assets, Equipment, Machinery and Systems as Bangkok Airways deems appropriate at its own cost. Such action must be for the benefit of increasing the Samui Airport operational capability.
3. Who is responsible for insurance for the property? Who is the beneficiary?

Insurance premiums of Samui airport and related properties (all of the leased assets) will be paid by Bangkok Airways throughout 30 years. However, the Fund acts as the beneficiary.

4. What is the revenue structure of the airport? Is it controlled by authorities?

Revenue structure of the airport operations is comprised of;

  • Passenger service charges (which are currently capped by the Department of Civil Aviation), Regulator allow to charge at maximum 300 baht per passenger for domestic flights and 600 baht for that of international flights.
  • Landing and parking fees (which are currently capped by the Department of Civil Aviation), Regulator allow to charge at maximum 100 baht per ton
  • Ground handling fees (which are not regulated by the Department of Civil Aviation)
5. Long Term Lease Agreement and Sub-Lease Agreement?

  • The Fund intends to seek benefits from investment by entering into the Samui Airport Agreements, which comprise the Sub-Lease Agreement for the sublease of the Leased Assets for a term of 3 years (with an option to renew for 9 terms, 3 years each) and the Utilities System Service Agreement for a term of 30 years.
  • At first, Bangkok Airways would like to lease back for 30 years in order to secure their position as the airport operator. However, after discussed with the land department, they insisted that the transaction (lease and lease back between the same parties) can not be registered. Under Thai law the lease agreement less than 3 years does not need to be registered. Therefore, a solution is the structure of 3 years rent back and the option for both party to renew the contracts with the same term and same condition for 9 times.
  • To renew the sublease contract, Bangkok Airways shall notify the Fund at least 2 years in advance of its intent to renew. Bangkok Airways have to comply with all material terms and conditions of all of the agreements and shall not be in breach of any of its representations and warranties given in the Sub-Lease Agreement and Bangkok Airways has to comply with all material terms and conditions under such Agreement. However, the Fund can call Bangkok Airways to renew without any condition.
  • In favor of the Fund to secure Bangkok Airways’ performance under the Long Term Lease Agreement and the Samui Airport Agreements, Bangkok Airway has provided the registration of a mortgage of the Leased Land , Runway, Parking Apron and the Construction on the Leased Land to the Fund. In addition to the mortgage, in order to ensure 1 year rental income for the Fund, Bangkok Airways has provided bank guarantee, cash, or securities pledge to the Fund in the amount of 12 monthly rental payments under the Sub-Lease Agreement and 12 monthly payments of the Fixed Service Fee under the Utilities System Service Agreement (equals to 570 Mil Baht)
6. Why the Fund lease only 30 years? What will happen after the end of year 30th?

It is the management decision to lease only 30 years. However, the fund has first right of refusal to acquire Trat and Sukhothai airport and other commercial area that can be leasehold or freehold depend on further negotiation.

1. What is the possibility to have the second airport?

There have been news reports in the past that there might be construction of the second airport on Samui Island . Due to its current stage of uncertainty and several relevant factors, the Management Company is unable to provide reasonable comments on the possibility of actual construction, the timing, and the affect on the Fund and Bangkok Airways if construction of a second airport in Samui Island actually happens.

However, according to a publication in relation to strategic plans to develop the Samui Island Sub-district Municipality by the Plan and Academic Department of Samui Island Sub-district Municipality in 2004, when considering the current physical conditions of Samui Island, where approximately only one-third of the total area is flat (or approximately 73 square kilometers), Bangkok Airways views that there is a low likelihood to find land with appropriate size and conditions for an establishment of a second airport in Samui Island. Theoretically, it has been said that the sea may be reclaimed and/or a hilly site may be leveled to provide appropriate and sufficient flat area for such construction; however, the investment costs for such reclamation of the sea and/or improvement of the hilly site may be too significant to justify such commercial investment. In addition, it takes time to determine and study the environmental effect and obtain approvals from relevant governmental authorities.

According to information given to the Management Company by Bangkok Airways, in 1989, Bangkok Airways became aware, through inter-governmental correspondence, that the Ministry of Transportation had no policy to nationalize the Samui Airport , and that it had no policy to construct a second airport in Samui Island . However, the future construction of a second airport at Samui Island would depend on the policies and discretion of the government and relevant authorities at the time.

2. Are there any alternative ways to go to Samui Island?

There are several transportations to go to Suratthani and then take a ferry to Samui island which takes around 2-2.5 hours.

3. Is there any other airline use the Samui airport?

Currently almost 100% of the flights are Bangkok Airways. However, According to the Airport license, Samui airport is a public airport. Every airline that qualified or fulfill the requirement of the airport can use this airport. At this time there are 3 other airlines which are Thai airways, Berjaya air and Firefly using the airport as well. Thai Airways is currently operating 2 direct flights daily.

4. What is the capacity of the airport?

Runway capacity

  • 45 x 2,060 meter runway with a 100 meter overrun on both sides
  • Two 125 x 150 meter permanent parking aprons that can accommodate 4 of ATR 72-500 aircrafts or 4 of Boeing 717-200 aircrafts.
  • Currently this airport can accommodates ATR 72-500, Boeing 717-200, Boeing 737 and Airbus 319 and other types of aircraft

Terminal capacity

  • The (new) terminal opened in the first quarter of 2007. The terminal can handle the passenger up to 2 million a year.
5. What is the ratio of domestic vs. international passengers?
FY 2005 Number of Flight % Number of Passenger %
Domestic 8,538.00 95 625,336.00 95
International 381.00 5 31,762.00 5
Total 8,919.00 100 657,098.00 100
6. Samui Detail?

1. District historical background

The name "Samui" is from an unknown language; it has been presumed that the word "Samui" came from the Malay language and some have said it is derived from the Hainan language and/or Tamil language; it has even been assumed to be derived from the name of a tree. However, "Koh Samui District" is today is an important district of Suratthani province.

2. General Condition

Location and Border

Koh Samui is an island located on the north east of Suratthani province with distance of 84 kilometers from the city and 750 kilometers from Bangkok.

Area

Approximately 252 Square Kilometer (157,273 Rai)M

Surrounding

  • North - Sea, Koh Pan-Gnun District, Suratthani Province
  • South - Sea, Khanom District, Nakornsrithamrat Province
  • East - Gulf of Thailand
  • West - Sea, Donsak District, Karnchanadis District, Chaiya District, Tha Shang District, and Suratthani - Muang District

Topography

Koh Samui is comprised of 53 islands (source: Island Registration Database). People reside on 3 Islands: Samui Island, Pluay Island and Tan Island.

  • Flatland: 33% of the Island
  • Mountains: 54% of the Island
  • Dune and beach: 8% of Island
  • Polder: 5% of the Island

Climate

  • Monsoon type climate
  • Average highest temperature between April to May is 37 degrees.
  • Average lowest temperature between December to January is 21 degrees.
  • Average temperature throughout the year is 21 degrees.
  • Highest rain fall is in November.
  • Average rain fall is 1,900 millimeters throughout the year.

3. Politics and Government

Local Government Authority, Number of Municipality, Tumbol Administration Organization, Tumbol and Villages

Divisions of local administration are under the Local Administration Act B.E. 2457 (A.D. 1914), being Tambol and villages comprising of 7 Tambol and 39 villages, being:

Tambol Village(s)
Tambol Ang Thong 6
Tambol Li Pa Noi 5
Tambol Taling Ngam 5
Tambol Na Muang 5
Tambol Ma Ret 6
Tambol Bo Phut 6
Tambol Mae Num 6

Local government has 1 municipality which is Koh Samui Municipality.

Population (divided based on male and female, Tumbol, Village and Municipality or Tumbol Administration Organization)

Total population is 44,652 people, which consist of 21,820 males and 22,832 females. The average density population per area is 155.68 people per square kilometer. The population can be divided by Tambol below:

1. What is the potential for external growth?

Apart from organic growth as stated above, the growth of this fund may come from the acquisition the new assets which fund has the first right to refusal as listed below:

  • Commercial Area at Samui Airport

    The management of Bangkok Airways intend to design the commercial area into a nice, cozy but surrounded by variety of shops that making around really easy and convenient for the passenger who waiting for their flights.

    This commercial area consist more than 20 shops and other entertainment & recreation area. The total area is around 11 acres.

  • Sukhothai and Trat Airport

    Potential of Sukhothai Airport

    Sukhothai (literally means "Dawn of Happiness") was the first truly independent Thai Kingdom, which enjoyed a golden age under King Ramkhamhaeng, credited with creating the Thai alphabet. The superb temples and monuments of this great city have been lovingly restored in Sukhothai Historical Park , a UNESCO World Heritage Site and a must-see for all travellers.

    Sukhothai is located on the lower edge of the northern region, 440 kilometres north of Bangkok or some 350 kilometres south of Chiang Mai. The province covers some 6,596 square kilometres and is divided into 9 Amphurs (districts): Muang Sukhothai, Sawankhalok, Sri Samrong, Si Satchanalai, Kong Krailat, Kirimas, Thung Saliam, Ban Dan Lan Hoi and Sri Nakhon

    Bangkok Airways plan to use the Sukhothai Airport as a centre to connect to the northern cultural tourist destination named as “Meh Khong heritage world tour” (Sukhothai-Luang Prabang-Yangon-Phnom Penh-Siem Reap)

    Airport detail

    Sukhothai Airport is a commercial airport located in Sawankhalok district, at latitude 17°14.2' north and longitude 099°49.1' east and about 54 meters above sea level (Total area 2,500 rai or 4 million SQ.M.; 27 kilometres from downtown). The Sukhothai Airport consisted of a 45 x 2,100 meter flat runway, with 100 meters on both runway sides and a prime coat surface. There are 50*250 meters parking bay that can serve 3 of boeing 737, as well as one passenger terminal to accommodate both arrival and departure passengers. The airport was opened as a public airport on 1996 by Bangkok Airways. Since then, Sukhothai Airport has been expanded from time to time to meet the growth in demand.

    Current Number of fight and passengers

    Sukhothai 2001 2002 2003 2004 2005 Jan-Aug 2006
    DOMESTIC
    Bangkok-Sukhothai 10,098 11,024 9,504 10,140 14,310 8,352
    Sukhothai-Bangkok 9,112 11,220 8,659 7,606 11,786 9,475
    Sukhothai-Changmai 4,537 4,109 4,033 4,338 4,467 2,993
    Changmai-Sukhothai 6,174 5,736 4,092 3,906 4,305 4,008
    INTERNATIONAL
    Sukhothai-Luangprabang 173 1,037 1,176 657 248 0
    Luangprabang-Sukhothai 167 632 214 0 0 0
    Total 30,261 33,758 27,678 26,647 35,116 24,828

    Potential of Trat Airport

    Trat is the province situated at the east border of , 315 kilometers from Bangkok . The town occupies the area of 2,819 kilometers or 1,761,875 rai. In the province, there are 5 districts, namely Maung Trat, Khao Saming, Laem Ngob, Klong Yai, Bo Rai and 2 sub-districts; Ko Kud and Ko Chang.

    Most of Trat areas lie in the Gulf of Thailand . This makes the province abundant with tourism resources. Trat has as many as 52 islands, especially Ko Chang include sea, waterfalls, and forest. The province is also the source of red sapphire, fine shrimp paste and sweet rakum, a kind of palm of genus Zalacca with sweet and acid taste.

    Islands and Beaches

    Having the long coastline of 165 kilometers, Trad has 42 lush islands in its boundary. Beaches along the city shore, from the western coast to the eastern, may be not spectacular but worth wading through.

    Koh Chang

    Second Largest Island is very popular among visitors. Situated in the nearest distance from Laem Ngob, it takes 1-2 hours to reach the desired destinations on Ko Chang. The best season to visit the islands is between October and May. During the rainy season from May to October, visitors are not allowed to the islands south of Ko Chang; for example, Ko Kut, Ko Mak, Ko wai, and Ko Kham. The boat trip to Ko Chang can be made all year round.

    Since Koh Change is second largest island and still natural and untried, the government has plan to promote the island for long-term and continue growth. Bangkok Airways sees this is the opportunities as second success after Samui airport.

    Airport detail

    Trat Airport is a commercial airport located in Southeast of Bang Phra near the border of Cambodia, at latitude 11° north and longitude 102° east (Total area 1,200 rai or 1.9 million SQ.M.; 35 kilometres from downtown). The Trat Airport consisted of a 45 x 1,800 meter flat runway. There are 25*150 meters. The airport was opened as a public airport on 2003 by Bangkok Airways. Since then, Trat Airport has been expanded from time to time to meet the growth in demand.

    Current Number of fight and passengers

    Trat 2003 2004 2005 Jan-Aug 2006
    Bangkok-Trat 7,219 20,929 34,504 25,414
    Trat-Bangkok 7,833 23,690 35,566 28,560
    Total 15,052 44,619 70,070 53,974
2. What is the upsize growth for the fund cash flow?
  • The rental formula which derive from the number of passenger and number of fights process in to Samui airport shall open for the upsize revenue to the fund since the past 5 years record show continuing average growth of 6 % (Y 2000-2005)
  • Unlike typical properties, Samui airport property fund is more like business which revenue does not limited by the areas. Due to the airport still have a plenty capacities to grow, the upsize of fund’s revenue is not limited.
1. What the financial outlook of the company?
Income Statment 2003 2004 2005
Passenger income - net 3,841,115,413 5,415,759,607 7,404,737,130
Aircraft rental income 197,445,035 171,055,221 101,814,243
Passenger service charge 151,130,280 212,413,738 241,838,692
FX gain 320,684,154 69,763,552 -
Cargo revenue 79,272,054 99,161,056 151,687,400
Other income 265,882,193 285,682,656 198,218,226
Total Revenues 4,855,529,129 6,253,835,830 8,098,295,691
       
Cost of services 42,963,363,840 4,017,488,597 5,622,589,624
Depreciation expense 458,204,630 555,000,000 602,000,000
Selling and admin expense 775,150,477 996,389,560 1,142,161,909
FX loss - - 200,599,273
Total Expenses 4,196,718,947 5,568,878,157 7,567,350,806
       
EBITDA 1,117,014,812 1,239,957,673 1,132,944,885
EBIT 658,810,182 684,957,673 530,944,885
       
Interest expense 378,952,537 465,329,981 499,527,976
Income tax 11,251,010 3,506,159 -
       
Net Profit 268,606,635 216,121,533 31,416,909

Ratio 2003 2004 2005
Debt (int bearing debt)/ EBITDA 5.9 6.1 7.18
Interest coverage (EBITDA/ int) 2.95 2.66 2.27
Debt/ Equity 3.57 2.84 2.56
Current asset/ Current liability 0.57 0.44 0.63
2. Who is the owner of the company?

Mr. Prasert Prasarttong-Osoth and his family are the founders of Bangkok Airways with 90% holding of Bangkok Airways’ shares. Mr. Prasert Prasarttong-Osoth and Bangkok Airways are the major shareholders of Bangkok Dusit Medical Public Company Limited (Bangkok General Hospital Public Company Limited), a listed company in SET.

3. What is the company background?

Bangkok Airways, formally named Sahakol Air Co., Ltd. (the “Company”), was established in 1968 as the first private aviation company in . The company won by bid in Washington D.C. to provide logistical services to the American GI bases in during the Vietnam War.

The initial routs of the Company were the Nakorn Radchasima, Krabi and Surin routs. Recently, Bangkok Airways adopted a strategy of airport ownership in order to control origin and destination traffic to locations suitable as cultural and natural tourist destinations. Mr. Prasert Prasarttong-Osoth was of the opinion that Samui Island would attract European tourists seeking sunshine and sea. Thus, in 1986, the Company launched three domestic routs and changed its name to Bangkok Airways. Later in 1989, Bangkok Airways completed the construction of its first owned airport - Samui Airport

Airline service and airport operations are the two major revenue sources of Bangkok Airways. The former involves domestic flights as well as international flights within the Indochina region, and , while the latter deals with operations of the Samui, Sukhothai and Trat airports.

4. What Bangkok Airways plan for the proceeds?
  • Reduce Debt in order to improve financial stabilities.
  • Around 1 billion baht for investment in hangar at the Suwannapoom Airport .
5. Why Bangkok Airways does PFPO?

The Company would like to raise fund to improve financial stabilities and finance for growth and new project. Currently PFPO seem to be the best way for the company and the investor since Samui Airport is the best asset the company have and it could offer the stable stream of cashflow to fund with potential growth. In addition PFPO is the most tax efficient to offer a good after tax return to investors.