The 3rd quarter results were the best ever, as were the first 9 months of 2010, greatly exceeding expectations.  The group wise revenue grew by 34%, passenger volume by 12% and the load factor was at 78% which is despite the aggressive capacity addition.  In terms of load factor, Air Asia is definitely edging closer to their nirvana (Tony’s own words) load factor rate of 85%.  The profit before tax was 327 million Ringgit.

 

AirAsia group carried 6.5 million passengers in Q3, 18.6 million passengers year-to-date and are on target to reach the 25 million mark by the end of the year.

 

The average fare in Malaysia has gone up 22% while achieving a reduction in non-fuel costs.  In Thailand, costs have significantly dropped with the addition of new Airbus planes and despite the political unrests, the fares have gone up by 24%.  As far as Indonesia is concerned, the fares have gone up by 20% with significant profitability from Indonesian routes.  By next year, Indonesia will have an all Airbus fleet, thus the Air Asia group will be 100% Airbus operated.

 

Looking ahead, AirAsia has incredible elasticity with fares and has lots of room to deal with oil price shocks if they may arise. They’re in a much better situation than many of their competitors.

 

From the perspective of its associate companies, Air Asia in Thailand has also had a super quarter, with a 46% year-on-year growth, 76% load factor and passenger volume growing by 9%.  Profit before tax was 530 million Baht.  Despite fantastic results from Thailand, Air Asia in Indonesia has been the star performer in the group with a 31% year-on-year growth, 81% load factor and passenger volume growing by 8%.  Profit before tax was at 191 billion Rupiah. These results clearly indicate that the investments into the two associates are starting to pay off very well.

 

What is interesting is that the combined profit of the Thai and Indonesian operations was almost half of the Malaysian profit. Tony Fernandes predicted that the Indonesian operation will soon be more profitable than the Malaysian operation, with Thailand catching up soon as well.

 

An interesting question that was posed from the dial-in-audience had to do with seasonality and how that affects the quarterly results.  Apparently, seasonality is not an issue anymore, for Air Asia today hasn’t reduced capacity at so-called low-seasons due to the massive growth.

 

Ancillary revenue is also becoming more and more important for the Air Asia Group and has grown in all the countries.  In just two years, they have gone from 15 Ringgit to 44 Ringgit ancillary revenue per passenger.  Thus they are on target to reach the prediction of 66 Ringgit per passenger by the end of 2011.  Ancillary revenue comes from charging for food onboard, luggage, normal check-in, which will be implemented soon (web check-in will be free), to revenue from Air Asia Cargo and Air Asia Go.

 

The group has also realized that Air Asia X is having a strong impact on leisure destinations such as Phuket, Bali and Hong Kong, feeding passengers to Air Asia on these very popular routes, mandating an increase in frequency and capacity. 

 

A question was posed to Mr. Fernandes in terms of the listing for AirAsia X, which he predicted would happen in 2011 or early 2012.   But before that we will see the Thai operation of AirAsia go IPO, then the Indonesian operation and only after that Air Asia X.

 

In terms of the fleet, AirAsia has had 8 new aircraft delivered in 2010, which has enabled them to move around some routes and increase capacity.  For 2012, they are looking at acquiring 12-16 new aircraft which is a revised-up number and is due to the huge demand which they cannot fulfil without additional aircraft.

 

Looking forward to 2011, forward bookings for 2010 Q4 show that this will be the strongest quarter by far, for all three companies.  And 2011 Q1 is already stronger than Q1 in 2010. 

 

> Malaysia:  There will be increased focus on strengthening domestic routes and adding capacity.  Kuching will become a new hub for the Malaysian operations.  Flights to Singapore will increase to 10 flights a day, aiming to build up to 24 flights a day within the next three years.  Singapore is one of the most profitable routes.

 

> Thailand:  AirAsia is starting to head into India, Delhi being the first route, soon followed by Mumbai.  They will also soon be launching the Phuket – Bali route, which is expected to be a very strong route.  The hubs in Thailand will be Bangkok, Phuket and Chiang Mai.

 

> Indonesia:  the focus in this market will be on international routes, the strengthening of hubs in Bali and Surabaya and launching a new route to Darwin.  Medana will become the 5th hub in Indonesia.

 

You may ask yourself, what is the next bullish market according to AirAsia?  Philippines.

 

With Q3, AirAsia has also started to fully disclose balance sheet and P&L information for Thailand and Indonesia, which is not required by regulations.  This is all in the name of transparency.

 

After releasing such successful Q3 results, Fernandes excitedly announced that by 2014, when the company will be 15 years old, he expects the AirAsia Group to be a net cash positive company.  This is a tremendous accomplishment. Today, being at nine years old, AirAsia Group has established a great brand through brilliant marketing, has three successful companies, great relationships with pilots and engineers, a very low cost structure and has a great base for growth given the dynamic and rapidly growing South-East Asian and Asian market.

 

It seems that the future for AirAsia Group has never looked this great.