AirAsia Bhd posted a net profit of RM367.16 million (US$116 million) for the second quarter ended June 30, 2014 (2Q14) from RM58.35 million a year ago, representing a 529% increase mainly due to foreign exchange gain on borrowings.
This was achieved on the back of a higher revenue of RM1.31 billion, up 5.1% from RM1.2 billion reported in the same quarter last year. The increase in revenue was on the back of a 1% year-on-year (y-o-y) growth in the number of passengers carried to 5.57 million, which match capacity growth of 1%. Seat load factor remained unchanged at 80%, in line with the company’s quarterly target.
Its operating profit for the quarter under review fell 17% y-o-y to RM174.19 million due to its affiliate, Thai AirAsia, posting its first quarterly loss that saw AirAsia equity accounting a share of net loss of RM13.6 million.
Aireen Omar: Aims to optimise profitability with lean operations and cost conscious culture
The low cost airline said that despite the fall in average fare, ancillary income continued to outperform, adding to the company’s first positive performance in revenue per available seat kilometre (RASK), since the start of irrational pricing same quarter last year. Earnings before interest and tax (EBIT) margin however, remained solid at 13%,”
AirAsia chief executive officer, Aireen Omar, said the airline continues to be disciplined in an industry where irrational competition exists.
“With our lean operations and cost conscious culture that aims to optimise profitability, the company embarked on a route rationalisation exercise in 2Q14, cancelling and cutting down frequencies on selected routes where the company felt were diluting yields.
“Our cost per available seat kilometre (CASK) at 13.32 sen, slightly up from the 12.48 sen recorded the same quarter last year, was mainly due to the increase in average fuel price of 9% y-o-y.
“Our non-fuel cost items remain under control as CASK ex-fuel was recorded at 6.50 sen, unchanged y-o-y.”
AirAsia group CEO Tan Sri Tony Fernandes said the decline in operating profit was due to the lower revenue as average fare declined by 14% y-o-y.
Tony Fernandes: Airline embarking on a route rationalisation programme
“This was mainly due to drop in passenger travel caused by the political situation, depreciation cost of taking aircraft into our own balance sheet and spending on public relations and marketing as the political demonstration in Bangkok continues into the second quarter of this year.”
Thai AirAsia’s load factor for the quarter reviewed was 78%, while ancillary income per pax increased 8% to THB341. CASK rose slightly by 2% to THB1.62 due to the 10% increase in average fuel price.
Indonesia AirAsia recorded an 8% increase in revenue to IDR1,507.82 billion from IDR1,398.23 billion last year. It posted an operating loss of IDR271.75 billion from an operating profit of IDR87.66 billion the previous year.
Its 2Q14 loss after tax was IDR340.34 billion, down from a net profit IDR51.66 billion last year.
Fernandes attributed the decline in Indonesia AirAsia’s operating profit to the weakening of the Rupiah and the increase in dollar-denominated cost such as fuel, maintenance and its lease expense, which led to a 33% increase in CASK at IDR606.16 from IDR456.19 y-o-y.
“We are now embarking on a route rationalisation programme, terminating loss making routes to ensure we optimise profitability at lower operational cost,”
On Philippines AirAsia, Fernandes said the company is investing a lot on marketing its brand locally and internationally to ensure it pushes passenger demand into the Philippines.
Fernandes “very optimistic” that the current losses in affiliate operations are short lived as most are due to external factors like the weakening of local currencies, geo-political climate and the fluctuations of fuel prices.
He expects its operations in Indonesia and the Philippines to return to the black in 2H 14. “I have spent considerable time on a turnaround plan for Indonesia and Philippines operations, which will be rolling out from 3Q14 onwards and I believe both will return to the black in 2H14.”
Fernandes said fare movements have improved. “Our average fare is on a positive upward trend as competitors have started to become rational again. We foresee capacity in Malaysia reducing and there will be re-alignment of business strategy by competitors to ensure sustainability.
AirAsia will take delivery of eight A320 aircraft in the third quarter of the year with four to be used in Malaysia, three for Thailand and one for India.
• Featured image credit: AirAsia
