BAFS considers switch to baht from dollars

Bangkok Aviation Fuel Services Plc (BAFS) is considering charging its customers service fees in Thai baht rather than US dollars to reduce its foreign-exchange risk. According to M.R. Supadis Diskul, the company's managing director, 90% of Bafs' business is transacted in dollars but nearly 100% of its operating costs are in baht.

Other jet refuelling firms around the world usually quote sales in dollars to bring them in line with the dollar-denominated oil and gas industry.

The baht gained 12% against the dollar last year and continues to appreciate. Bafs loses three million baht a month for every one-baht gain in the exchange rate.

M.R. Supadis: "No turning back" if baht chosen. � WEERAWONG WONGPREEDEE

However, M.R. Supadis noted that business transactions in baht needed thorough consideration given the possibility of the local currency weakening in the future.

He said the company would raise its hedging ceiling to 70% from the existing 50% as a way to prevent possible damage from forex losses.

Bafs plans to review its currency strategy before making a proposal to the board meeting in August.

''We will use one method or another [charging in baht or more hedging] to solve our forex-loss problem,'' he said. ''The point is, if we decide to charge our clients in baht, we can't turn back. So we will have to be very cautious about it.''

Bafs charges airlines five US cents per gallon of jet fuel at Suvarnabhumi Airport and six cents at Don Mueang.

M.R. Supadis said that Bafs would also hold talks soon with Kasikornbank about rescheduling its debt repayments of 178 million baht to 10 years from the existing eight-year term that ends in 2012.

Bafs posted a net profit of 162.6 million baht in the first quarter, a 28% increase over the same period last year, on sales revenue of 589.3 million baht, up 78%.

The encouraging performance was helped by a 7% increase in fuel sales volume from the first quarter last year.

Bafs believes fuel sales volume in the second quarter will drop by 4-5% from the previous quarter due to the low season for the aviation industry.M.R. Supadis said Bafs projected revenue this year would grow by 7% to 1.64 billion baht driven by the rising number of flights at Suvarnabhumi and Don Mueang. Fuel sales volume will also increase to 4,423 million litres this year from 4,271 million last year.

The reopening of Don Mueang required Bafs to invest an additional 40 million baht in four fuel dispensers, bringing its total equipment to 40 units.

Bafs has a market share of 91% in volume at Suvarnabhumi this year with the remainder held by ASIG, its only competitor at the airport.

Bafs shares closed yesterday on the SET at 10.30 baht, up 10 satang, in trade worth 10.76 million baht.


Source: Bangkok Post by Busrin Treerapongpichit
Saturday May 19, 2007