KMB profit hit by high costs, low fares, fewer passengers

Higher operating costs, lower fares and declining custom are eroding the profitability of Transport International Holdings' flagship franchised bus service, Kowloon Motor Bus, managing director John Chan Cho-chak has said.

Transport International, which once boasted one of the highest returns on equity among Hong Kong utilities, saw its return slump to 14.5 per cent last year from 17.2 per cent in 2004. Excluding a one-off gain of $90.5 million from the sale of its Kwai Chung bus depot, net profit plunged 32.5 per cent to $493.4 million from a year ago.

The situation worsened in the first four months of this year, with fuel costs surging more than 30 per cent, tunnel fees rising 13 per cent and labour costs climbing 2 per cent, Mr Chan said.

Making matters worse, fares were reduced as a result of a newly-instituted fare adjustment mechanism even as passenger numbers slipped 0.5 per cent, a decline Mr Chan blamed on competition from MTR Corp and Kowloon-Canton Railway. For all of last year, passenger numbers fell 5 per cent.

Mr Chan said the smaller decline in passengers reflected the absence of new rail competition. 'We got a break this year,' he said, after facing the opening of the MTR's Tseung Kwan O and KCRC's West Rail and Ma On Shan rail lines over the past three years.

'We face a challenging environment,' he said, adding that he hoped that city officials 'will take a macro view when considering our proposal to cancel some low-demand or money-losing routes'.