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No wringing of hands and moaning as AirAsia soldiers on to post growth

Posted on 25 May 2011 at 00:27 am

Ours not to “wring our hands and moan” at the high fuel prices, ours “but to use our creativity” and so AirAsia gets on with it to post a growth in operating profit for the first quarter of 2011.

Group CEO Tony Fernandes, said, “What is particularly significant for us is that our operating profit margins were also significantly higher year-on-year, demonstrating that we are maintaining tight control of costs even as we grow revenues.

“Yes, fuel prices shot up – but that is something beyond our control. Our response is not to wring our hands and moan, but to use our creativity to address the issue and find ways to overcome this challenge.”

He said the group maintained its load factor at 80%; increased its RASK by 12% y-o-y; grew EBITDAR margins by three percentage points to 38% year-on-year; and increased its cash balance to RM1.8 billion.

The company however saw a decline in profit after tax of 23%, largely due to lower unrealised foreign exchange gains in this quarter, he said.

In terms of actual numbers for the Group, Q1 2011 registered revenue of RM 1.05 billion; Profit After Tax of RM 171.93 million; load factor of 80% (up from 74% y-o-y); Revenue/ASK up 12% (y-o-y) for MAA, up 13% for TAA and 10% for IAA. EBITDAR margins for MAA, TAA and IAA rose to 38%, 22% and 37% y-o-y, respectively.

Fernandes said that a deliberate “load active” strategy meant that while average fares declined, the payoff came in the form of higher passenger load factors of 80%, up 17% y-o-y. 

“The strategy is to increase passenger loads, and monetize this increase. This helped us push RASK for MAA by 12%. Our unit revenue is up 2%, showing that our strategy is working and this proves that AirAsia has a very robust operating model,” he said.

On ancillary, Fernandes said that every RM spent per passenger helps offset approximately USD1 per barrel increase.
“We have raised our ancillary charges on certain products and that has been able to offset much of the pressures on margins. Our ancillary revenue per pax is up in all three operations: MAA at RM 50 per pax (up 31% from RM38 y-o-y); TAA at THB 368 per pax (up 34% from THB 274 y-o-y); IAA at IDR 152,052 per pax (up 57% from IDR 96,666).”

He said that ancillary income will continue to be the catalyst for AirAsia to grow further, citing the AirAsia and Expedia joint venture. 

Fernandes also highlighted the first quarter performances of TAA (Thai AirAsia) and IAA (Indonesia AirAsia).
He said TAA performance was strong as it weathered the difficult 1Q11 by generating THB 4,086 million, recording a growth of 33% year-on-year; Profit after tax was also up 30%. This 1Q11 was contributed a lot by a seasonally strong first quarter especially with a 23% growth in passengers carried and together with the newly-introduced Indian routes performing well. 

As for IAA, the affiliate posted a good 38% rise in revenue of IDR 774,846 million, with ancillary revenue continuing to grow by 57%. Load factor was at 79% (up from 72% y-o-y). This performance can be supported with the Profit before tax of IDR31,943 million which rose 588% year-on-year. It has also managed to increase average fares by 12%.

On the outlook for the rest of 2011, Fernandes stressed the Group’s laser-like focus on keeping costs down.
With the fuel surcharges helping defray some of the rising cost of fuel, there is also a determined effort “in pushing load factors higher on key profitable routes and capturing further market share from competitors,” he said.

“We are still anticipating the launch of our AirAsia Philippines in the second half and I am just excited on the progress to get this venture started. We are also re-looking into Vietnam and hopefully an exciting announcement will follow suit soon. These moves will further strengthen our presence in the ASEAN skies,” Fernandes said.


Tags: AirAsia , Tony Fernandes , Q1 2011 results , Thai AirAsia , Indonesia AirAsia