Koito Manufacturing Co. plunged the most in 18 years in Tokyo trading after the Bangkok Post said Thai Airways International Plc may seek $550 million in compensation from a seat-making unit following delivery delays.
Koito, part-owned by Toyota Motor Corp., tumbled as much as 20 percent, the biggest intraday decline since March 1992. The company fell 17 percent to 1,035 yen as of 12:39 p.m. Unit Koito Industries Ltd. dropped 3.3 percent.
Thai Air’s board will discuss today whether to begin court proceedings against Koito Industries, Raj Tanta-Nanta, its vice president for investor relations, said by phone. The Bangkok- based airline hasn’t decided how much it will seek, he said. Koito Industries earlier this year halted deliveries and began inspecting seats in about 1,000 planes worldwide after admitting to making unauthorized design changes and using uncertified materials for at least a decade.
Koito Industries hasn’t been informed of any pending legal action from Thai Air, said Yoichiro Kuroiwa, a spokesman for the Japanese manufacturer. The company has received claims from a “number” of airlines, he said. It set aside 3.6 billion yen ($44 million) for compensation last fiscal year and it expects to need another 3.3 billion yen in the year ending March 31, he said. Shinji Karasawa, a spokesman for Tokyo-based Koito Manufacturing, said the company was investigating the report.
The late arrival of Thai Air’s seats forced the carrier to delay plans to deploy 11 planes, including Airbus SAS A380s, the Bangkok Post said yesterday, citing unidentified people. Singapore Airlines Ltd. and All Nippon Airways Co. also postponed the introduction of planes earlier this year because of seat delays.
“It’s bad news that in a worst-case scenario Koito could have to pay $550 million compensation to just one company,” said Shiro Sakamaki, an analyst at Daiwa Securities Capital Markets. “Still, the odds are very high that if Koito does have to pay compensation then it will be less than $550 million.”
Koito Industries has tumbled 53 percent this year. Koito Manufacturing, which owns 50 percent of Koito Industries, has dropped 30 percent.
To contact the editor responsible for this story: Neil Denslow at email@example.com