BMCL expansion to bring economy of scale and profit

Bangkok Metro Plc (BMCL), operator of the capital’s underground mass-transit system, listed on the Stock Exchange of Thailand in September 2006. Sombat Kitjalaksana, managing director, discusses the company’s strategy and outlook.

What is BMCL’s business model?

BMCL is the first metro operator in Thailand and we were granted the exclusive concession for the design, manufacture, supply, installation, testing and commissioning of the mechanical and electrical equipment for the operations and maintenance for the system. We own and operate the Blue Line, which is 20 kilometres in length with 18 stations. The key success factor in this business is people who are passionate and determined to ensure our quality meets the highest possible international standards. As a result of this passion, our trains operate on schedule more than 99% of the time, and we are a member of the global Nova Group of Metros, where BMCL is recognised for its high safety and operational standards. 

What are BMCL’s current routes, capacity and utilisation rates?
The Blue Line is 20 km in length with 18 stations. We look at capacity in two dimensions — the capacity of the infrastructure, which means what the civil works are prepared for, and the capacity of the existing trains and cars. For infrastructure, we are operating at a 20% utilisation rate, as the infrastructure was set up to allow six cars per station handling between 1.2 and 1.3 million passengers a day. We have 19 trains with only three cars each and a maximum capacity of 360,000 riders a day, currently operating at 80% or 280,000 riders a day.

What effect will the upcoming new routes have on BMCL?
We have received the second concession for the Purple Line, running 22 km from Tao Pun to Bang Yai with 16 stations. BMCL will benefit in multiple ways. The link to the Blue Line will bring a potential 70,000 to 100,000 new riders a day, which in turn should result in an increase in average trip length from five stations at an average fare of 25 baht to six or seven stations and an average fare of 30 baht. Operationally we will experience natural economies of scale as a result. Also next year we hope to receive the third concession for the Blue Line extension, which will further increase ridership.

BMCL has been expanding into commercial space and advertisements. How is this progressing?

In recent years, we have modified our commercial activities by combining three entities into one — Bangkok Metro Networks Ltd (BMN), in which BMCL owns 65.19%. The goal is to ensure synergy between advertising, retail and telecommunications. We’ve seen the benefits, with revenue increasing to 392 million baht last year from 263 million in 2012, and with a second and potentially third concession we expect to see a natural increase in the performance of BMN from increased ridership.

Last year, BMCL raised its capital. What were the reasons and how has the capital been used?

We raised capital after the confirmation of the Purple Line concession because we needed funds to expand train and carriage capacity. Also, we reduced our outstanding debt, which has substantially reduced our interest payments, and we have more working capital to improve our systems and fare collection and expand our team.

What are the biggest risks facing your business?

Our risks are both internal and external. Externally, concessions cover a fixed period and any delays in expanding the network shorten our ability to recoup our investment. Internally, it’s our systems and our teams. I believe the people in this industry must be passionate about it and want to be the best operator, and we have to ensure this passion is passed on from generation to generation to ensure our standards are of the highest possible quality.

What impact will the Asean Economic Community (AEC) have on your business?
Almost half of Thailand’s GDP is generated from Greater Bangkok. Thus, regardless of the AEC there is a need for the network to expand for more of the capital to be connected. Should the AEC have a strong positive economic effect on Thailand and our neighbours over the next decade, then it may be possible for us to have a network in another major Thai city or operate and maintain systems in neighbouring countries.

Where do you see BMCL in five years?

With the Purple Line and a possible third concession for the Blue Line extension next year, our business will be in good shape. I still believe the performance of the company is driven ultimately by good systems and a strong team that ensures the best service possible and that on a global level, we’ll continue to be recognised for our high quality standards in service and safety, and BMCL will be a profitable company in the coming years.