Bangkok Aviation Fuel Services Plc (BAFS) provides aviation refuelling and related services at Suvarnabhumi, Don Mueang and other airports in Thailand. Founded in November 1983, it was listed on the Stock Exchange of Thailand in April 2002. Managing director Prakobkiat Ninnad discusses the company's strategy and outlook.
What is BAFS' business model?
BAFS was founded in 1983 as a result of a cabinet resolution to set up an integrated fuel facility for Don Mueang airport. Thai Airways International was assigned to coordinate with the major oil companies and the Airport Authority of Thailand to establish the business. BAFS' core services are separated into three categories — an aviation fuel depot, a hydrant pipeline system and aircraft refuelling services. These services are provided to Don Mueang, Suvarnabhumi, Koh Samui, Sukhothai and Trat airports.
In addition, last year BAFS acquired Fuel Pipeline Transportation Ltd, which provides a multiproduct pipeline transport service from an oil refinery and depot in Bangkok's Chong Nongsi subdistrict to the BAFS oil depot at Don Mueang and ends at the FPT oil depot in Ayutthaya's Bang Pa-in district. This complements our pipeline service from Makkasan to the fuel depot at Suvarnabhumi airport.
Who are your customers?
Mr Prakobkiat says BAFS is determined to grow and create value in a sustainable way.
Our direct customers are the oil companies, as the oil companies and airlines negotiate directly with one another, while BAFS provides services of storage, hydrant and refuelling on behalf of the oil companies for their airline customers. This is the beauty of BAFS — the system allows open access and thus healthy competition, as 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 service volume will be 4.95 billion litres. We have also begun to diversify our income by using our storage depots for other products such as diesel.
Capacity is not an issue for BAFS, though. Much growth potential remains, as fuel facilities are part of the infrastructure of an airport. Any development or expansion plan must be discussed and communicated closely with airport authorities to ensure capacity can be planned at an early stage. Thus, for Don Mueang we were able to support its additional expansion, while for Suvarnabhumi we have the necessary land to expand our facilities as well thanks to this early-stage planning.
Please explain the nature of the industry.
At all major international airports, it is essential that there be a single integrated fuel facility for reasons of safety and economic efficiency. Such facilities require a large initial investment, technology to provide international-standard safety and quality control, and economies of scale to ensure a lower unit cost for airlines. Storage depots and hydrant systems are part of the key airport infrastructure that has to be executed first. If multiple companies provide depot and hydrant systems, standards could suffer and unit costs will increase.
For the refuelling services, where fuel is pumped from the 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 are the biggest risks facing your business?
Naturally, we can be affected by air traffic in and out of Thailand, global economic downturns and domestic political crises. However, we hedge all these risks by focusing on operational efficiency. We also operate in an industry that is not environmentally friendly, so we must be prudent, execute best practices and follow international standards and guidelines.
On the other hand, if there is an issue involving fuel standards, it will result in negative perceptions of not only BAFS but also Thailand's international airports and the country.
If we continue to follow best practices and maintain cost and operational efficiency with the highest standards and quality control, we can ensure sustainable growth while carrying out corporate social responsibility by helping the environment as well as ensuring Thailand's positive image.
How will the Asean Economic Community (AEC) affect your business?
The AEC will open more opportunities for us, as we expect to see more flight freedom, which will result in more regional airlines, and smaller secondary airports will be given an opportunity to grow in both Thailand and neighbouring countries. Thus, BAFS with its history, technical expertise and track record of safety can at the very least provide our technical expertise to these up-and-coming airports as well as bid for concession rights like we are doing in Yangon. There we are among the last four companies selected in the bidding process to be the service operator for its airport.
Where do you see BAFS five years from now?
BAFS is a continually learning organisation that is determined to grow and create value in a sustainable way with responsibility towards society and the environment. We hope to maintain our excellent performance rating by the International Airlines Associations and the Joint Inspection Group from the major oil companies and in time grow in Thailand and throughout the region by using our operational experience and technical expertise.
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, with more than 500 listed clients. This interview was conducted by ShareInvestor. For more information, email admin.th@shareinvestor.com or visit www.shareinvestorthailand.com