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Soaring oil prices hurt Thai industry

AirAsia unfazed by drop in net profit, remains optimistic

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Soaring oil prices hurt Thai industry

Thailand’s Ministry of Industry is preparing measures to assist operators of small- and medium-sized enterprises (SMEs) to survive, as oil prices are expected to continue rising during the third and fourth quarters of this year, a senior ministry official said last week.
Ministry of Industry permanent-secretary Chakramon Phasukavanich said that as global oil prices had now reached US$70 per barrel, Thailand’s industrial sector was being strongly affected - especially the country’s food-processing industry.
“The Ministry of Industry is preparing several measures to help the industrial sector,” Chakramon said. “The sector is being hit by rising oil prices and as such, we are working at developing logistics systems that will consume less oil; controlling electricity charges and also encouraging factories to use alternative sources of energy.
“We anticipate oil prices will continue rising during the third and fourth quarters of 2006 due to higher demand in the world markets and the expected economic growth of the world’s leading economies.”
Another senior official, Atchaka Brimble, director-general of the Industry Economics Office, said that small and medium-sized industrial production operations were more severely affected than larger factories as most of them use fuel oil to power their production lines. SME operators were advised to find ways to keep their businesses going by lowering production costs and also boosting management efficiency.
A survey shows that during the first half of 2006 Thailand’s industries consumed 35 per cent of the country’s total energy consumption, ranking second after the transportation sector, which used 38 per cent. (TNA)

AirAsia unfazed by drop in net profit, remains optimistic

Southeast Asia’s budget airline AirAsia’s net profit for the third quarter fell by 44 percent. The performance was attributed to lower ticket prices and higher maintenance costs. The airline managed a net profit of US$6.3 million in the fiscal third quarter, down from US$11.3 million during the same period a year earlier.
The decrease in profit was mainly due to lower average fares arising from its aggressive promotions, competitive pressures and heavy maintenance checks due to the induction of the last batch of Boeing 737 aircraft. Its revenue, however, rose 23 percent on-year to US$56 million.
Despite the high cost of jet fuel, the no-frills carrier remains positive on long-term growth as more routes come on stream. AirAsia will be flying to Hanoi and Brunei soon, its group chief executive officer Datuk Tony Fernandes said.
For the full year to June 30, 2006, AirAsia expects to achieve modest growth or least match the figures achieved in the 2005 financial year, said Fernandes. The carrier logged a net profit of US$31 million in its previous fiscal year.
As per the information available, margins will also improve as it flies to more local destinations beginning August 2006, following the domestic air route rationalisation plan. AirAsia will in August take over most of domestic routes currently served by money-losing Malaysia Airlines under a revamp of domestic services.
Under the plan, Malaysia Airlines will cut its current domestic routes from 118 to 19 main-trunk destinations, while AirAsia will take over 96 routes. “We will sub-contract some of the routes to a new airline. The ownership of the airline is still unknown but AirAsia will not hold any stake in it,” Fernandes said.
AirAsia, which has fully hedged its fuel needs for the current fiscal year, plans to extend its fuel hedge for the second half of 2006, Fernandes added.
AirAsia doesn’t consolidate passenger traffic nor earnings of its associates - Thai AirAsia and Indonesia AirAsia - into its financial statements as they are both 49 percent-owned by the airline.
For the nine months ended March 31, the airline’s net profit fell eight percent on-year to US$24 million, but revenue jumped 32 percent US$170.5 million. (eTN Asia)

 

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