Hong Kong's largest bus operator, Kowloon Motor Bus, is eager to talk to the government about using public money to set up a fare stabilisation fund - but the government is not in favour of the idea.
In two weeks' time the bus operator's parent company Transport International - a subsidiary of big developer Sun Hung Kai Properties - will announce what is expected to be a loss for the first half of the year.
Sun Hung Kai Properties in March announced a 36 per cent rise in interim net profit, to HK$21.01 billion. KMB got short shrift when it said two weeks ago it required government aid to keep the business sustainable.
Evan Auyang, KMB deputy managing director, says that for every HK$6 the bus operator made last year, it pocketed only 10 HK cents as rising fuel prices ate into revenues.
'Fuel used to make up just about 8 per cent of our expenses. Now it is 23 per cent,' Auyang said. 'The government said we are a commercial operation and we should carry our own risks - but we have no control over setting fares; we are controlled by strict regulations on bus acquisitions and we cannot effectively rationalise our network. So what is so commercial about the business?'
Auyang conceded that the earnings did not include income from advertising and other investment activities, and if those revenues were taken into account KMB earned 40 HK cents per average HK$6 fare and had a gross profit margin of 6.67 per cent - though that still short of its permitted rate of return on average net fixed assets of 9.7 per cent.