AirAsia in for better Q2 due to lower fuel costs

by **Cals** Mon 19 Aug 2013, 05:37

Published: Saturday August 17, 2013 MYT 12:00:00 AM
Updated: Saturday August 17, 2013 MYT 8:05:28 AM
AirAsia in for better Q2 due to lower fuel costs

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PETALING JAYA: AirAsia Bhd is expected to turn in better second-quarter results due to lower fuel costs boosting operating margins, said analysts.

The analysts added that the budget carrier’s strong operating statistics in the said quarter could bolster its results. AirAsia is expected to announce its second-quarter financial performance on Aug 21.

“AirAsia’s second-quarter earnings are expected to be within our estimates, with core earnings likely to inch higher 3% quarter-on-quarter (q-o-q) and 5% year-on-year (y-o-y) on the back of a revenue growth of 4% and 10%, respectively,” RHB Research Institute Sdn Bhd analyst Ahmad Maghfur Usman said.

He noted that the main highlight to watch out for was AirAsia’s yields due to the emergence of Malindo Air in the domestic low-cost carrier space.

“We expect yields to start seeing pressure – dropping by 4% – although this would be offset by higher ancillary revenue per person, thus narrowing the drop in overall financial year (FY) 2013 yields to 2%.

“However, we expect the yield downside to be mitigated by higher associate profits and lower fuel costs, as jet fuel came in lower y-o-y and q-o-q by 7% and 10%, respectively,” Ahmad said.

RHB Research has maintained a “buy” call on AirAsia, with fair value intact at RM3.94.

For the full year, analysts expect AirAsia to post RM885.2mil in earnings.

Affin Research analyst Sharifah Farah said AirAsia’s second-quarter results “would likely continue to impress”.

She said that based on the said quarter’s operating statistics, it expects AirAsia’s second-quarter revenue to “come in stronger” than the RM1.3bil posted in the first quarter.

In the second quarter, Malaysia AirAsia (MAA) continued to register decent growth, carrying 5.5 million passengers, up 12.4% y-o-y, bringing the total number of passengers carried in the first half of 2013 to 10.7 million, up 9.8% y-o-y.

“At 9.8% passenger growth, this is within our FY13 passenger growth assumption of 12.4%, as we expect growth to come in stronger in second-half 2013 due to seasonality,” Affin said.

Thai AirAsia and Indonesia AirAsia also registered impressive performances in the second quarter.

In view of softer jet fuel prices, Affin expects AirAsia to register a better operating margin in the second quarter. In that quarter, the average jet fuel price was US$116 (RM379.66) per barrel, which was 9.6% lower q-o-q, but only 4.5% lower y-o-y.

“Based on our simulation, for every US$5 (RM16.36) drop in jet fuel prices, our FY13-FY15 earnings would be enhanced by circa 10%,” it added.