BAFS Sees Revenue Falling Under Strengthening Baht

(With reference from Bangkok Post)

Bangkok Aviation Fuel Services (BAFS) expects sales to fall as the baht appreciates against the dollar, according to managing director M.R.Supadis Diskul.

A stronger baht has been affecting the jet-refueling company since late last year, as its income is booked in US dollars.

The company has been affected by the baht appreciation since the late last year as the baht has been up around 8.6% to 37.52 baht per US$ last month from 41.07 per US$ in the end of 2004.

The tendency of baht would continue to pound against US dollar throughout this year, M.R.Supadis predicted.

The firm expects further baht appreciation, but planned to cut its forex risk by hedging up to 50% of its services income through short-term contracts.

Currently, its hedged services income received in May is counting around 20% of total services income.

Delays in opening the new Suvarnabhumi Airport had also affected BAFS's sales. Revenues are expected to double once the new airport opens.

On the other side, the company needs to bare the burden from significantly increasing of maintenance costs came from Suvarnabhumi facilities, without return at present.

M.R.Supadis said rising interest rates had also raised its debt repayments to 56 million baht a quarter from July last year from loans taken to pay for new facilities at Suvarnabhumi, including an oil depot, pipelines, hydrant and plane-line.

BAFS's total capital expenses for 2006 stood at nearly five billion baht.

The inflation rate of 6% and diesel prices hike also costs its operation significantly.

It will raise its service charge to US$0.274 a US gallon from the current US$0.258 from July 1 - still lower than the charge at many international airports.

However, the higher fee rate still lower than other international airports in the region, such as Hong Kong International Airport at Chek Lap Kok charges a service fee of $0.553 a gallon and Singapore's Changi Airport $0.58.

BAFS may also consider raising the rent for its facilities to boost rentals to 6% to 7% of earnings from 3% earlier. The rest comes from services.

M.R Supadis said the company would cut expansion to reduce expenses.

BAFS reported a sales revenue for the first quarter of 331 million baht up 14% from 290 million baht ofthe first quarter of 2005, with a net profit increase of 9.4% to 127 million baht from 116 million baht last year. Rising demand for jet fuel had helped income growth.

BAFS provides jet refuelling services at Don Muang, Sukhothai Airport and Samui Airport. BAFS shares closed on the SET yesterday at 9.60 baht, down 15 satang, in trade worth 5.15 million baht.