Prakobkiat: Focus on quality and efficiency

BAFS was founded in 1983 under a cabinet resolution to set up an integrated fuel facility for Don Mueang airport. Bangkok Aviation Fuel Services Plc (BAFS) is the sole provider of aviation refuelling, depot and hydrant services at five airports in Thailand. Managing director Prakobkiat Ninnad discusses the company's strategy and outlook.

What is BAFS's business model?

Thai Airways International Plc was assigned to coordinate with the major oil companies and the Airport Authority of Thailand (now Airports of Thailand Plc or AoT) to found the company.

BAFS's core services consist of three parts: the aviation fuel depot, hydrant pipeline system and aircraft refuelling services. These services are provided to the Don Mueang, Suvarnabhumi, Koh Samui, Sukhothai and Trat airports.

In addition, in 2013 we acquired Fuel Pipeline Transportation Ltd (FPT), which provides multiproduct pipeline transport services from the Bangchak refinery and Chong Nonsi depot to the BAFS fuel depot at Don Mueang and ends at the FPT depot in Ayutthaya's Bang Pa-in district.

This complements our pipeline service from Makkasan to the fuel depot at Suvarnabhumi airport.

Who are BAFS's customers?

Our direct customers are the oil companies, which negotiate directly with the airlines. BAFS provides storage, hydrant and refuelling on behalf of the oil companies for their airline customers. This is the beauty of BAFS, as the system allows open access and thus healthy competition since the airlines can select their own suppliers.

As a service provider, we focus purely on quality and efficiency to ensure delivery of jet fuel safely and on time to the airlines. This year, we expect jet fuel services volume of 5.58 billion litres. Capacity is not an issue though. Much growth potential remains, as fuel facilities are a major part of airport infrastructure.

Any expansion needs to be discussed and communicated closely with AoT to ensure capacity can be planned at an early stage. Thus, for Don Mueang we are able to support its additional expansion, while for Suvarnabhumi we have the necessary land. We have also begun to diversify our income sources by using our depots for other products such as diesel.

Please explain the nature of the industry.

At all major large international airports, it is essential to have a single integrated fuel facility for safety and economic efficiency. A large initial investment, technology to meet international safety and quality-control standards, and economies of scale to keep unit costs low for airlines are all imperative.

Also, the fuel depot and hydrant systems are part of the key airport infrastructure that must be executed first. Hence, this service that BAFS provides is vital. If multiple companies provide depot and hydrant systems, there will be negative effects on standards and unit costs will increase.

For refuelling services where fuel is pumped from hydrant pits to the aircraft, there may be at most two or three providers per airport. Otherwise, the same issue arises in terms of quality control and economic efficiency.

What related or other businesses is�BAFS expanding into?

Recently, the government approved a plan by our subsidiary FPT to expand its pipeline from Bang Pa-in to Phichit and Lampang provinces for more efficient fuel transport to the North in terms of economic, social and environmental effects.

What are the biggest risks facing your business?

Naturally we can be affected by air traffic into and out of Thailand, global economic downturns and domestic political crises. However, we hedge all these risks through operational efficiency. We also operate in an industry that is not environmentally friendly and so have to be prudent, execute best practices and follow international standards.

On the other hand, if there is an issue with fuel standards, both BAFS and Thailand's international airports will be perceived negatively. We believe if we continue to follow best practices, focus on cost and operational efficiency with the highest standards and quality control, we can ensure sustainable growth. By taking part in CSR activities, we also help the environment and ensure Thailand's positive image.

What impact will the Asean Economic Community have on your business?

The AEC will open more opportunities for growth in aviation traffic and flight freedom. This will result in more regional airlines and smaller secondary airports both in Thailand and neighbouring countries. With our history, technical expertise and track record of safety, we can provide technical expertise to these up-and-coming airports.

Where do you see BAFS in five years?

BAFS will be a continually learning organisation that is determined to grow and create value in a sustainable way with responsibility to society and the environment. We enjoy excellent performance ratings from the International Air Transport Association and the Joint Inspection Group of the major oil companies. This has allowed BAFS to become the regional learning and training centre for aviation fuel and refuelling services.

The Executive Q&A Series is presented by ShareInvestor, Asia's leading financial internet media and technology company and the largest investor relations network in the region. The interview was conducted by Pon Van Compernolle. For more information, email pon@rossvancompernolle.com or supat@shareinvestor.com or visit ShareInvestorThailand.com