Aboitiz sees flat year amid stiff competition from airlines

MANILA, Philippines - The country’s largest shipping firm, Aboitiz Transport System Corp., expects revenues to stay flat this year, as the maritime industry continues to reel from high oil prices and stiffer competition from airlines. In a disclosure to the Philippine Stock Exchange, the company said it was expecting that "2008 will continue to be a challenging year." The company reported an 83% drop in earnings to P65.7 million for the second quarter, compared to over P400 million in net income posted last year, as high oil prices in the second quarter eroded margins. Erramon M. Aboitiz Jr., a member of the company’s board, said the company’s fuel costs had risen to 40% of total expenses, as compared with its budget for fuel the year before at just under 30%. In an interview late last week, the assistant vice president of the company’s passenger shipping brand SuperFerry, Andrew D. Deyto, said the company would try to make up for lower revenues through the introduction of more "value-added services." He said the company would continue "to provide customers with better services." Mr. Deyto said the company has begun door-to-door package delivery services, and earlier this month, introduced a service allowing customers to buy tickets using their Automated Teller Machine (ATM) cards — a first among any carrier, including airlines, Mr. Deyto noted. Last June, the Aboitiz Transport System acquired supply chain firm Scanasia Overseas Inc. in a bid to expand its logistics operations. Scanasia is engaged in sales, marketing, warehousing and transportation of temperature-controlled and ambient food products to customers in the Philippines. The company said it would "continue to expand its value-added service market" with the new acquisition. The development and expansion of the company’s supply chain solutions business led to a 25% increase in service revenues for the second quarter from the same period last year. The company’s freight revenues grew by only 1.3% for the April to June period, as compared with the 12.3% growth seen the year before. Passenger operations likewise saw revenues drop by more than a tenth in the second quarter as compared with the same period last year. This was, however, lower than the 19.5% passenger revenue drop recorded the year before. "The decline is largely a result of the reduction in passenger ferry capacity brought about by vessel sales and the conversion of excess passage capacity of some vessels to freight," the company said. Officials said this has resulted in a 30% reduction of passenger capacity. "Moreover, the industry continues to face fierce competition from airlines," Aboitiz Transport added. "There’s a lot of competition from low-cost airlines," Mr. Aboitiz said. "They (airlines) have been taking a lot [of passengers]," he added. Mr. Deyto said that even with the reduced capacity from 2007, the liner still plans to carry around two million passengers for 2008. Mr. Deyto noted that this number was similar to that of the previous year. He said the company would sustain the passenger numbers by increasing the number of passengers for every trip. Mr. Deyto said target was to fill up 80% of the ship’s total passenger capacity per trip for improved efficiency, versus the average 70% load factor posted in 2007. - BusinessWorld