January 22, 2008

Subway to Profit By 2011: Passenger Numbers Still Well Below Target

By Nareerat Wiriyapong, Bangkok Post, Thailand

Jan. 21--The SET-listed subway operator Bangkok Metro Plc (BMCL) expects to break even by 2011, even though this year it would likely fall well short of its original target of 300,000 daily passengers.

Managing director Sombat Kitjalaksana said the delay in extending Bangkok's rail network stemmed from lower-than-expected passenger growth over the past three years.

The subway, which runs from Hua Lamphong to Bang Sue with a total distance of 20 kilometres, currently carries 195,000 passengers daily. BMCL hopes for 210,000 daily passengers by the end of the year.

"Despite the high oil prices, which started since last year, we have yet to see the phenomenon of a big number of Bangkok commuters switching from road to rail transport," Mr Sombat said.

"That's mainly because the current network is limited and there are not enough to take them from one place to another for their journey. If we have enough coverage of the network, they will absolutely opt to use the rail lines no matter whether petrol prices are cheap or high."

If it reaches 210,000 daily passengers this year, Mr Sombat said BMCL would be able to generate enough revenue to cover operating costs but not the interest on its outstanding 11-billion-baht debt.

After three years of operation, the company he accumulated losses of several billion baht, Mr Sombat said.

He declined to offer details.

"It's not until we reach 300,000 daily passengers, which will hopefully happen in the next two to three years, that we would be able to make a profit from the operations," he said.

BMCL and Bangkok Mass Transit System (BTS), which operates two Skytrain elevated rail lines, can carry a combined 600,000 passengers a day.

With an investment of 150 billion baht, the government plans to add five more rail routes in the capital to take cars off Bangkok's congested streets, improve air quality and cut oil import bills.

Following years of delay, at least two of the five routes are targeted to start construction this year: the Blue Line from Hua Lamphong to Bang Khae and the Purple Line from Bang Sue to Tha Phra.

BMCL, with a 25-year concession on the subway, is favoured by transport officials to operate the new routes, possibly through a joint venture with the state-owned Mass Rapid Transit Authority (MRTA).

Mr Sombat said BMCL was ready for any option for the new lines. He said the company already had facilities, including depots and control rooms for the subway, that could save investment cots for developing new routes.

BMCL also has prepared 1.5 billion baht to buy new trains to accommodate more passengers from existing routes and possible new lines.

"The extended routes would bring more passengers to the existing network, enabling us to achieve our ridership target more easily," he said.

"The projects are feasible in terms of economic benefits. Investors would be ready to take part and it would not be difficult to mobilise funds."

Mr Sombat said BMCL and BTS already signed a memorandum of understanding for a joint-ticketing system for the elevated and underground trains to lure more passengers. Under the plan, a joint venture would handle ticket management, financial clearing and promotions.

The single ticket is expected to be launched within this year. In the future it would cover other public transport systems, including the Airport Rail Link, he said.

To generate more revenue, Mr Sombat said BMCL planned to utilise more commercial areas at its 18 subway stations.

So far, only the Sukhumvit and Phahon Yothin stations use commercial space out of nine stations with a combined space of 20,000 square metres, he said.

The Chatuchak station would be opened for retailers this month, he added. Retail sales now account for only 5 percent of BMCL's total revenue, which was approximately one billion baht in 2006.


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