Management’s Discussion and Analysis For the period ended 31 March 2020 Bangkok Airways Public Company Limited and Its Subsidiaries 1 ASIA’S BOUTIQUE AIRLINE Bangkok Airways Public Company Limited and its Subsidiaries Management’s Discussion and Analysis for the year ended 31 March 2020 Executive Summary Thai Economy in the first quarter of 2020 happened into recession due to Covid-19 pandemic, which severely affected purchasing power and demand globally. Tourism sector faced a catastrophe, started heavily in March, after most of the countries announced travel restrictions, plus an effect from a wildfire incidents in the northern of Thailand (Source: Bank of Thailand) Due to the Covid-19 pandemic, Revenue Passenger Kilometer (RPK) started to drop in February and became worsen globally in March. Travel restrictions and Visa-ban policy were launched to control the pandemic. As a result, for aviation industry in the first quarter in 2020, global RPK plunged 22.2 percent. Airlines in Asia Pacific was badly affected which RPK dropped 33.3 percent, followed by Europe and North America with 18.0 and 15.7 percent drop respectively. For the supply side, global Available Seat Kilometers (ASK) decreased 14.7 percent. Asia Pacific had the biggest drop at 23.3 percent, followed by Europe and Middle East at 13.8 and 10.8 percent respectively. (Source: International Air Transport Association, IATA) For Thailand Tourism in the first quarter of 2020, international visitor arrivals ( IVA) decreased 38. 0 percent. The biggest drop was from East Asia at 54.4 percent while China dropped severely at 60.0 percent, followed by the Middle East and Africa with 50.0 and 41.5 percent drop respectively. In addition, visitors from almost all regions started to show huge slowdown since February, while number of visitors from Europe started a significant decline of 51. 2 percent in March, resulting in a total drop of 15.0 percent in the first quarter for European market. (Source: Ministry of Tourism and Sports) Due to the covid-19 pandemic which severely has affected to airline industry since late of year 2019. The Company decided to suspend and terminate some routes during March 2020 to match with low traveling demand and cooperated with government orders as well as the announcement from Civil Aviation Authority of Thailand (CAAT) regarding to COVID-19 spread out situation. As a result, for the first quarter of year 2020, the number of passenger decreased 23.3 percent compared with the same period last year. The major passenger was from international point-of-sale at 57.0 percent, while through the website point-of-sale, bangkokair.com at 20.0 percent and point-of-sale Thailand at 17.0 percent of total passenger. In the first quarter of year 2020, the Company reported net loss at 338.8 million baht, decreasing by 166.3 percent from same period last year. In consequence of lower of total revenue that declined from the same quarter last year by 17.5 percent. The downward of total revenue was resulted from airline business decreasing by 25.2 percent, airport business decreasing by 18.4 percent and airport-related businesses decreasing by 14.6 percent. 2 ASIA’S BOUTIQUE AIRLINE The Company reported net loss attributable to the equity holder of the Company was 338.6 million baht. Loss per share for this quarter was 0.16 baht. Notable Event 1Q2020 Airline Business 1. The COVID-19 pandemic was tremendously affected the airline industry. The Company decided to corporate with government orders and the Announcement from Civil Aviation Authority of Thailand (CAAT) regarding to COVID-19 spread out. The Company received permission from CAAT to temporarily suspended flight operations from March 2020 as details below; Domestic Routes Route Number of flight per week Bangkok - Chiang Rai 21 Samui - Krabi 10 Chiang Mai – Krabi (one way) 7 Chiang Mai - Phuket (one way) 7 Chiang Mai - Mae Hong Son 10 Phuket-U-tapao 7 Samui- U-tapao 11 Chiang Mai - Samui 7 International Routes Number of flight Number of flight Route Route per week per week Bangkok – Phnom Penh 42 Chiang Mai – Mandalay 4 Bangkok – Siem Reap 35 Chiang Mai – Luang Prabang 3 Bangkok – Yangon 28 Chiang Mai – Yangon 4 Bangkok – Mandalay 14 Bangkok – Maldives 7 Bangkok – Nay Pyi Taw 6 Bangkok – Mumbai 7 Bangkok – Vientiane 14 Samui – Hong Kong 14 3 ASIA’S BOUTIQUE AIRLINE Number of flight Number of flight Route Route per week per week Bangkok – Luang Prabang 14 Samui – Kuala Lumpur 7 Bangkok - Danang 14 Samui - Singapores 14 Bangkok – Phu Quoc 14 Samui - Chendu 4 Bangkok - Cam Ranh 4 Samui – Chongqing 1 2. In 1Q2020, the Company had total 28 Codeshare airline partners. The Company signed Codeshare agreement with Gulf Air in March 2020 in order to provide smooth services continually to the passengers. The agreement with Gulf Air includes domestic routes; Bangkok – Phuket, Bangkok – Chiang Mai, Bangkok – Krabi, Bangkok – Trat, Bangkok – Samui, Bangkok – Lampang and Bangkok – Sukhothai. 3. The Company has announced precaution and transmission prevention plans for the airline and the three airports regarding the Coronavirus 2019 pandemic, for the reassurance of passenger health and safety. The plan includes all stations to perform primary screening general health conditions of the passengers, intensify hygienic measures of the aircraft. Set up an assistance center assist staff whom may require emergency assistance; In-flight announcements; Protective face masks are provided to crew members and ground service staff to wear when on duty. Airport Business 1. Samui Airport has been recognized as the world’s most on-time airport in the small airports category in the annual On-Time Performance (OTP) Review released by travel data and analytics expert, Cirium. Samui Airport achieved an on time departure performance of 95.08% in 2019. 2. The Board of Directors approved to establish U-tapao International Aviation Co., Ltd., for airport development project in the future. The registered capital is 4,500 million baht. The Company holds 45.0 percent of shares and made payment for share subscription totaling 506.3 million baht paid in capital in February 2020 Airport Related Business 1. As of 31 March 2020, Bangkok Air Catering Company Limited (BAC) had three additional airline customers, while two airline customers’ agreement were expired. This caused total number of its customers to be from 20 to 21 airline customers. 4 ASIA’S BOUTIQUE AIRLINE 2. As of 31 March 2020, Worldwide Flight Services Bangkok Air Ground Handling Company Limited (BFS Ground) had 7 additional airline customers, causing total number of its customers to be from 81 to 88 airline customers for ground service equipment. 3. As of 31 March 2020, WFS-PG Cargo Company Limited (BFS Cargo) had 6 additional airline customers, causing total number of its customers to be from 71 to 77 airline customers for international cargo terminal services. 5 ASIA’S BOUTIQUE AIRLINE Management’s Discussion and Analysis Bangkok Airways is a full serviced airline providing premium service to passengers. Company owns and operates 3 airports which are Samui Airport, Trat Airport and Sukhothai Airport. In addition to airline and airport businesses, it operates airport related businesses which include passenger and ramp services, catering services and international cargo. Consolidated financial statement of the Company consists of Separate Financial Statement and Financial Statements of the 14 subsidiaries that include: 1) Bangkok Air Catering Company Limited (BAC) 2) Worldwide Flight Services Bangkok Air Ground Handling Company Limited (BFS Ground) 3) Bangkok Airways Ground Service Company Limited (PGGS) 4) Bangkok Airways Holding Company Limited (PGH) 5) SA Services Company Limited 6) BFS Cargo DMK Company Limited 7) BAC Gourmet House Company Limited 8) Bangkok Air Catering Phuket Company Limited 9) Gourmet Primo Company Limited 10) Bangkok Air Catering Samui Company Limited and 11) Bangkok Air Catering Chiang Mai Company Limited 12) More Than Free Company Limited 13) Bangkok Air Aviation Training Center Co., Ltd. 14) Bangkok Air Catering Don Mueang Co., Ltd Airline Operating Data January-March Unit 2020 2019 Scheduled passenger revenues (1) Million Baht 4,442.9 6,015.1 Domestic 3,070.9 3,897.3 International 1,372.0 2,117.8 Available Seat Kilometers (ASK) Million Seat - 1,501.4 1,708.9 Domestic Kilometers 854.8 922.2 International 646.6 786.7 Revenue Passenger Kilometers (RPK) Million Passenger - 931.9 1,274.7 Domestic Kilometers 596.2 743.1 International 335.7 531.6 Passenger Load Factor 62.1 74.6 Percentage Domestic 69.7 80.6 International 51.9 67.6 Number of scheduled passengers carried Thousand 1,324.1 1,725.1 Domestic Passengers 969.2 1,206.6 International 354.9 518.5 6 ASIA’S BOUTIQUE AIRLINE January-March Unit 2020 2019 Number of flight flown 17,066 18,915 Flights Domestic 11,777 12,742 International 5,289 6,173 Total seat capacity 2,059.7 2,291.4 Thousand Seats Domestic 1,388.5 1,502.2 International 671.2 789.2 Aircraft utilization Block Hour 7.8 9.0 Airbus A320 per Day 8.9 10.0 Airbus A319 per Aircraft 7.8 8.9 ATR 72-500 & ATR 72-600 6.9 8.0 Number of aircraft at period end Aircraft 40 41 Airbus A320 9 9 Airbus A319 16 16 ATR 72-500 2 4 ATR 72-600 13 12 Kilometers flown Million Kilometers 11.7 13.3 Average Stage Length Kilometers 703.8 738.9 Baht per Passenger Yield (2) Passenger - 4.77 4.72 Kilometer Revenue ASK (RASK) 3.42 3.89 Cost per ASK (CASK) Baht per Available 3.40 3.54 Cost per ASK excluding fuel cost Seat - Kilometer 3.14 2.79 RASK – CASK 0.02 0.35 Remarks (1) These figures are different from those included in Company’s consolidated Financial Statements as they include revenues (before deducting discounts and commissions) from scheduled flights, net interline revenues from flights operated by other airlines and marketed by it on a code-share basis, revenues derived from non-codeshare interline sales by it of seats on other airlines’ flights, fuel and insurance surcharge revenue.