Airports Of Thailand's Q3 Net Profit Plunges

[Mid]

Airports of Thailand's Q3 net profit plunges amid dispute over duty-free shops

08.15.07, 3:42 AM ET

BANGKOK (Thomson Financial) - Airports of Thailand's (AOT's) net profit for its financial third quarter ended June dived by 84 percent from a year before despite higher traffic, because of a dispute over the management of duty-free shops, the company said Wednesday.

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forbes.com

[chinthee]

That must explain why they have put up those huge limousine counters by baggage claim where the girls call out to you, and with roving touts, both inside and outside customs, and another big counter upon exiting customs.

Trying to make up lost revenue eh?

[samran]

um...

lets be clear. They have stopped reporting earnings from King Power because of the court case. Probably going into escrow until it is sorted out?

Anyway, me thinks AOT is a good bet in the long run. It is a monopoly, and Suwanna is reaching capacity so they'll need to figure out what to do with Don Muang with the overflow traffic. Bangkok will eventually have a proper two airports system. Sure, they'll botch up the implementation repeatedly...but they'll get there.

Maybe I'm a glass half full type of guy!

[Mid]

so your telling me that the business model is skewed that heavily re retail ???

silly me , I thought the core business was planes .............................

[chinthee]

Evidently, the geniuses that put together that business plan thought duty free would constitute an inordinate amount of earnings, hence the Loooong walks past endless duty free shops, UNLIKE all the top-rated airports.

[samran]

so your telling me that the business model is skewed that heavily re retail ???

silly me , I thought the core business was planes .............................

I have had a little bit to do with airports in the past. And yes, the business model for most major airports does include a retail element. Actually, the more the better, especially in the west where landing charges and other monopoly services are heavily regulated by the regulator (eg ACCC in Australia, and OF-something in the UK..)

Given that airport charges are nominally governed by a similar CPI-X formula here (I say nominally as they the minister can overturn the proposal forwarded by the Department on Aviation), retail is the natural way to may revenues.

[chinthee]

so your telling me that the business model is skewed that heavily re retail ???

silly me , I thought the core business was planes .............................

I have had a little bit to do with airports in the past. And yes, the business model for most major airports does include a retail element. Actually, the more the better, especially in the west where landing charges and other monopoly services are heavily regulated by the regulator (eg ACCC in Australia, and OF-something in the UK..)

Given that airport charges are nominally governed by a similar CPI-X formula here (I say nominally as they the minister can overturn the proposal forwarded by the Department on Aviation), retail is the natural way to may revenues.

Samran, I have no objection to plenty of retail, but appropriately placed so that it does not constitute annoyance for passengers. Again, Hong kong is a perfect example. Lots and lots of retail, immediately after descending immigration, BUT in an intelligent "spoke and wheel" arrangement which allows for MANY shops, but not a long walk to any gate. You either walk to the nearby gates, or get on the train to the remote gates.

Very pleasant and painless experience that allows MORE THAN ENOUGH retail. Suwannaphoom is excessive and in your face.

And, to continue my rant on design screw-ups, what's the first thing that greets you when you emerge tired outside customs in Hong Kong? A protected area where nobody is allowed that contains foreign exchange booths, and a number of clearly marked machines allowing you to buy Airport Express train tickets into either Kowloon or HK Island. No touts! Furthermore, what's the 2nd thing that greets you AFTER you emerge to the unprotected area? No touts. Period. And, the HUGE counter clearly marked where you can buy your Airport Express train tickets, and convenient 3 day passes. Absolutely painless. Nobody in your face at any time. AND, the cheapest and most convenient way into town provided to you at EVERY opportunity.

Not like Suwannaphoom, where to find the public taxis you have to go downstairs, which the unfamiliar wouldn't find anyway having been hit on several times by AOT touts.

Apart from that. It's a good airport.

Edited August 15, 2007 by chinthee

[Mid]

And yes, the business model for most major airports does include a retail element.

that's a given ,

the question is the bias in the local model ,

84%'s worth ?????

excuse me but ,

[Carmine6]

Reporters are gullible and lazy. If you go to the AOT website you can get the financials for the last quarter and year to date which also have lower concession revenue. In last year's quarter, concession revenue was about 25% of total revenue. This year it was 5% with King Power excluded. Other revenues (except office and state property rents) were up a lot. Passenger service charges which made up 40% of revenue last year were up 50% for the March quarter this year. Even without King Power, revenues were up 14%, so definitely much higher with King Power.

But there's also a huge increase in expenses compared to the prior year. Total operating expenses more than doubled, up 137%. Of that, Depreciation and Amortization is 488% higher due I think to Suvarmbai being an operating asset this year and not last year. Repair & Maintenance was 209% higher. Personnel expenses up 19%. Not unexpected stuff given they're running a whole new airport, but it's a bigger baht impact than the in limbo concession revenues.

Not to say that you can automatically assume that'll be true for the June quarter, but adds a bit of context instead of just reporting what the company says.

[UnknownPoster]

The report doesn't include the millions in unreported cash going into the pockets of senior managment.

[samran]

Samran, I have no objection to plenty of retail, but appropriately placed so that it does not constitute annoyance for passengers. Again, Hong kong is a perfect example. Lots and lots of retail, immediately after descending immigration, BUT in an intelligent "spoke and wheel" arrangement which allows for MANY shops, but not a long walk to any gate. You either walk to the nearby gates, or get on the train to the remote gates.

Agree with your basic sentiments, but I'll leave the analysis on this to Steveromanginio who works in retail and knows about this stuff.

Having said that, two weeks ago coming back from Jakarta, it too bloody ages at Changi to walk from one plane to the next, at least 15 to 20 mins and the train wasn't an option.