AirAsia 2q net profit surges fivefold to RM367.16m

by **Cals** Thu 21 Aug 2014, 12:51

Business & Markets 2014

Written by Gho Chee Yuan of theedgemalaysia.com

Thursday, 21 August 2014 09:53

KUALA LUMPUR: AirAsia Bhd’s net profit rose more than fivefold to RM367.16 million for the second financial quarter ended June 30, 2014 (2QFY14) from RM58.35 million in the previous corresponding quarter, mainly due to foreign exchange gains on borrowings and deferment of taxes.
In a filing with Bursa Malaysia yesterday, AirAsia said it gained RM202.92 million and 115.1 million on foreign exchange borrowings and deferred taxation respectively in 2QFY14.
In comparison, the budget carrier recorded a deficit of RM122.2 million on foreign exchange borrowings and RM47.99 million on deferred taxation in 2QFY13.
Revenue for 2QFY14 grew 5.19% to RM1.31 billion from RM1.25 billion a year ago while earnings per share jumped significantly to 13.20 sen from 2.10 sen a year ago.
The number of passengers carried in 2QFY14 grew by a marginal 1% to 5.57 million, while seat load factor remained unchanged at 80% year-on-year.
The carrier, however, posted a 17% decline in operating profit year-on-year to RM174.19 million due to its Thai AirAsia affiliate posting its first quarterly loss of RM13.6 million.
AirAsia said political unrest in Thailand kept loads and fares low, and the situation is expected to persist until September. It expanded capacity in Thailand by 23% during 2QFY14; passenger growth fell short at 16% despite a 14% cut in the average fare.
For the six-month period to June 30, AirAsia’s net profit more than tripled to RM506.87 million from RM163.14 million in the corresponding period last year, while revenue rose 2.6% to RM2.61 billion from RM2.55 billion.
In a statement, AirAsia chief executive officer (CEO) Aireen Omar said the carrier had embarked on a route rationalisation exercise in 2QFY14 by cancelling and cutting frequencies on selected routes which it felt were diluting yields.
She noted that the cost per available seat kilometre (CASK) grew marginally to 13.32 sen in 2QFY14 from 12.48 sen a year ago due to the increase in average fuel price of 9% year-on-year.
“Our non-fuel cost items remained under control as CASK ex-fuel was recorded at 6.50 sen, unchanged year-on-year,” she said, adding that the carrier’s revenue, measured in terms of revenue per available seat kilometre (RASK), rose 2% to 15.36 sen.
“Our strategy internally was to grow positive RASK on the back of a challenging irrational pricing environment and I am very glad to see we were able to achieve that this quarter (2QFY14).”
As at June 30, 2014, AirAsia’s deposits, bank and cash balances stood at RM1.37 billion while its net gearing level was 1.95 times.
Despite the loss registered by affiliate operations, AirAsia group CEO Tan Sri Tony Fernandes remained optimistic that the current losses are short lived.
He said AirAsia recognised a profit of RM2 million from Asian Aviation Centre of Excellence Sdn Bhd (AACOE), and RM3 million from AAE Travel Pte Ltd (AAE Travel).
“These are new part of the three pillars of strength of [the] AirAsia group, namely airline specific revenues, ancillary income and private equity investment,” he said.
Looking forward, Fernandes foresees capacity in Malaysia reducing and a realignment of business strategy by competitors to ensure sustainability.
“There have been improvements in terms of fare movements. Our average fare is on a positive upward trend as competitors have started to become rational again,” he said.
He believes that capacity addition in the region and Malaysia will be back to a realistic level in the second half of 2014.

This article first appeared in The Edge Financial Daily, on August 21, 2014.