Management Discussions for Reolian Financial Statement Year 2011

 
[Macau, June 27, 2012] In regards to the Year 2011 Financial Statement of Reolian Public Transport Co., Ltd which was publicized on June 27, 2012, the management of the Company hereby makes following comments. 

Financial Status

Having financial loss in the first year of operations has been widely regarded as a normal phenomenon for public transport operators. Although the loss is larger than the company expected before the start of concession contract, it is still reasonable considering Reolian’s total investment of MOP200million. This investment shows Reolian’s commitment to Macau community as a locally based company in the long run. 

Huge inflation and extra costs have created much pressure on Reolian’s financial status. Inflation results from various aspects in the industry and has affected the operations of public bus companies in Macau, which include (according to statistics by DSEC): 

   - 90% increase of overall bus captain salary (including bonus) due to lack of qualified drivers in local labor market

   - 20% fuel price increase

   - 9% increase of CPI 

Especially, at the beginning of operations, Reolian faced severe challenges to create over 400 bus captain positions from tense local labor market. Therefore, employee salary, especially bus captains’ salary, takes up a major part of Reolian’s operating costs due to the surge of salary level of bus captain in the industry. Such salary inflation causes extra MOP25million on Reolian’s operating expenditure. 

Moreover, the postponement of the execution of the concession contracts has led to additional costs, both direct and indirect, to Reolian of estimated MOP8million.

Nonetheless, Reolian possesses liquidity to maintain stable operations with the support of the parent companies, Veolia Transport RATP and HN Group, and amongst its shareholders.

 
In the face of the financial pressure, Reolian never stops undertaking improvement measures over the past year full of difficulties and challenges, and insists its investments in Macau to further contribute to the sustainable development of local public transport.

Challenges & Continuous Improvements in 1st Year of Operations

At the start of operations in August 2011, Reolian encountered severe shortage of bus captains due to the lack of qualified drivers in local labor market. Despite all these difficulties, Reolian spared every effort to deliver reasonable public transport services in accordance with the company’s promises to Macau residents and the Government. Improvements were largely achieved in time for the opening of the new 2011 school year in September.

Since then, Reolian has worked continuously to improve its services by implementing series of measures in different aspects of operations, including:

 • Continuous recruitment of bus captains and optimization of their remuneration to maintain a steady staff level. Reolian has now recruited a team of around 400 bus captains and thus operations reliability and flexibility are immensely enhanced.

 • Safety as the top priority in operations has been continuously improved, through regular assessments of key performance indicators, safety management systems, cross-divisional Safety Committee, extensive and on-going trainings for bus captains, and the initiation of Safety Officers at high traffic bus stops. As a result, accident rates is in declining trend and has dropped 50% comparing with that of August 2011

• Installation of technology-powered system, Operation Control Centre, to maintain and enhance bus frequency and reliability

• Implementation of hardware optimization measures for reduced mobility passengers on buses of line H1. Moreover, Reolian is studying on various optimization options to enhance both safety and accessibility for passengers

• Continuous efforts to provide enhanced Macau bus network information such as introducing “Google Transit” route planner service in cooperation with Google

As a local company with the goal of providing safe, reliable and ever-improving bus service to the community, Reolian will continue its dedication to reaching this objective through continuous improvements in operation performance.