Bangkok subway's
future profit potential
By Jon Fernquest |
Today's Bangkok Post business frontpage has an article on the profitability of Bangkok's subway.
Why Bangkok's subway isn't profitable yet and what will likely make it profitable in the future is the focus of the article.
BMCL is the SET-listed subway operator Bangkok Metro Plc.
(See photo on right of couples holding their wedding certificates after underground marriage ceremonies at the auspicious Bang Sue station, where the neighborhood is named "Village of Fidelity")
Bangkok Mass Transit System (BTS) operates the two elevated rail lines known as the "skytrain."
The subway and skytrain combined have a capacity of 600,000 passengers a day but the subway isn't running anywhere near capacity yet.
The subway will likely fall short of this year's target of 300,000 daily passengers.
300,000 is the breakeven point after which the subway would start to turn a profit, a breakeven point that probably won't reached for a few more years yet.
Currently there are 195,000 passengers daily and BMCL's hopes are set on 210,000 by the end of the year.
210,000 would generate "enough revenue to cover operating costs but not the interest on its outstanding 11-billion-baht debt."
Despite rising oil prices, commuters have not switched from cars to mass transportation in the large numbers anticipated.
This is partly due to the fact that the subway and skytrain lines are not yet widespread in Bangkok (low network coverage).
This will be changing soon with the construction of new lines:
With an investment of 150 billion baht, the government plans to add five more rail routes in the capital...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).
Over the three years it has been in operation the subway operator BMCL has accumulated losses of several billion baht.
BMCL's revenue in 2006 was one billion baht.
Retail space at subway stations has revenue boosting potential.
Renting out commercial space at the Sukhumvit and Phaholyothin subway stations now only accounts for 5% of total revenue, but retail space at Chatuchak station is to be added this month and others may follow.
The addition of revenue generating retail space has been slow: "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"
The added convenience of a single ticket for public transportation should also draw more people away from their cars:
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
The completion of condo projects near subway stations should increase passenger counts in the near future.
Despite a slow start, mass transport projects should perhaps be viewed as a long-term transformation in the way people live and work in the city of Bangkok.
This transformation not only has potential for energy savings, it also has potential for reducing overall reliance on cars and the creation of more pedestrian friendly, clean, safe, and beautiful communities, just as extensive mass transportation networks have done in other Asian countries such as Japan and South Korea (For further reading see Wikipedia on the New Pedestrianism and the World Carfree Network)
(Source: Bangkok Post, Business, 21-01-08, temp-link)
Vocabulary:
auspicious - lucky
fidelity - being loyal to your husband or wife
capacity - the maximum possible amount
running at capacity - the system is operating at the maximum possible amount
running near capacity - the system is operating near the maximum possible amount
fall short of - does not reach a level, less than the desired level
the breakeven point - when revenue meets (covers) costs, after this there is profit (See Wikipedia on breakeven and breakeven analysis)
turn a profit - makes money, money remains after expenses are paid, revenue - expenses > 0
generate - create
generate revenue - create revenue
cover operating costs - the business can pay for operating costs (so that the company either breaks even or turns a profit)
outstanding debt - money borrowed and not paid back yet
commuters - people traveling to work
anticipated - expected
widespread - exist over a large area
a network - a system of connected lines or routes such as the roads or the telephone system in a country
network coverage - how much area the system of lines or routes covers (for example, if you can travel between any two points in the city using the subway there is very good coverage)
commercial space - area within buildings used for business
residential space - area within buildings used for residential
retail space - area within a building used by stores to sell goods
added convenience - when things become more useful and easy to use for the people who use them
Memorandum of Understanding (MOU) - an agreement to work together in the future that establishes principles that will guide the projects
financial clearing - exchanging payments between customers of different banks, settling financial transactions (See Wikipedia on clearing)
transformation - complete change
