AirAsia 2Q profit down by more than half

AirAsia 2Q profit down by more than half
Business & Markets 2013
Written by Cynthia Blemin of theedgemalaysia.com
Thursday, 22 August 2013 11:05

KUALA LUMPUR: Budget carrier AIRASIA BHD []'s second quarter (2Q) numbers came in below expectations as net profit fell 61.9% to RM58.35 million from RM153.1 million a year ago, partly due to higher expenses, foreign exchange losses and deferred taxes.

Revenue rose a marginal 5.9% year-on-year to RM1.25 billion for the quarter ended June 30 (2QFY13).

While it was a seasonally weak quarter for the airline, analysts said the results were below expectations.

According to Bloomberg data, analysts expect the airline to post earnings of RM885 million this year.

For the cumulative six months (1HFY13), AirAsia's net profit of RM163.1 million was 49.9% lower than the RM325.57 registered in the same period a year ago.

Analysts said the 13th general election (GE13) could be one of the contributing factors as well as the entry of Malindo Air into the market in March.

"I thought Malindo can only give a fight when it has more than 10 aircraft but the numbers show otherwise," said an analyst. Malindo has six planes operational currently.

AirAsia CEO Aireen Omar said in a statement yesterday that the decline in RASK (revenue per available seat per kilometre) in 2Q was due to low-peak season, GE13 and the negative impact of the Lahad Datu intrusion in Sabah in April.

Despite that, said Aireen, the airline still managed to record a strong load factor of 80% which was in line with its strategy of pushing passenger growth via low fares.

During the quarter under review, AirAsia recorded a 23.5% increase in operating profit year-on-year (y-o-y) to RM243.94 million, due to the increase in revenue and decline in operating cost.

"We have seen a good improvement from our cost reduction exercise, particularly in reducing our overall spend on advertising and sponsorship as the company builds its brand awareness via the web. Cost per available seat per kilometre [CASK] was reported at 12.83 sen (down 7% from 13.86 sen y-o-y), backed by the lower average fuel price which is down 8% y-o-y. CASK ex-fuel also decreased at 6.53 sen (down 7% from 7.02 sen y-o-y)."

Aireen said the company continued to post a healthy profit for the quarter under review on the back of higher revenue, driven by the 12% increase in the number of passengers carried which is in line with the 12% increase in capacity.

She added that its ancillary business recorded a 6% increase in ancillary income per passenger at RM39 as compared to RM37 the same quarter last year.

The directors did not recommend any dividend for the quarter under review.

Cash from operations was RM105.2 million in 2QFY13 compared to RM368.3 million in the immediate preceding quarter.

Net cash flow in 2QFY13 amounted to a RM516.8 million outflow, as cash outflows from investing and financing activities exceeded operating cash inflows.

The group's total debt as at end-June 2013 was RM8.8 billion.

AirAsia told Bursa Malaysia that the group's net debt after offsetting the cash balances amounted to RM7.2 billion, which translates to a net gearing ratio of 1.56 times, 12% higher than the immediately preceding quarter.

Commenting on the outlook, AirAsia group CEO Tan Sri Tony Fernandes said: "Our focus now is to improve loads and passenger growth by offering low fares, while driving costs down and at the same time increasing ancillary take- up."

He also said there will be a few repricing and repackaging exercises in the second half for the airline's ancillary offerings, including looking at increasing the take-up rate of pre-book meals.

"This will be done through a new pricing tier and an improved menu and wastage reduction via analytics and better product planning," he said, adding that other new initiatives include having WiFi services on board and a revamped duty free business.

These will help AirAsia to reach the ancillary income per passenger target of RM60 per passenger in the medium term.



This article first appeared in The Edge Financial Daily, on August 22, 2013.