Highlight AirAsia sees strong earnings in 2H

by **Cals** Fri 15 Aug 2014, 23:06

Highlight AirAsia sees strong earnings in 2H

Business & Markets 2014

Written by Cynthia Blemin of theedgemalaysia.com

Friday, 15 August 2014 08:53

KUALA LUMPUR: AirAsia Bhd group chief executive officer Tan Sri Tony Fernandes expects the low-cost carrier’s earnings to pick up in the second half of the year (2H14) on lower fuel prices and strong bookings as it rolls out new ancillary products.

“Passenger load factors (number of seats filled) remain strong, [our operations in the] Philippines are turning around and Indonesia is going to be profitable in the fourth quarter,” he told reporters yesterday after the launch of Redbox, the airline’s new low-cost courier service.

Indonesia AirAsia had swung to a net loss of RM102.35 million for the financial year ended Dec 31, 2013 (FY13) compared to a net profit of RM52.5 million in the previous year, despite higher revenue. The airline reportedly dropped plans for an initial public offering of its Indonesian affiliate due to poor financial results.

“Without a doubt, our fourth quarter looks very strong, [although] the third quarter is generally our weakest quarter.

“We will wait and see, but the wind is blowing in our favour,” said Fernandes.

The airline is due to announce its financial results for the second quarter ended June 30 (2QFY14) on Aug 20.

In a report yesterday, Maybank IB Research estimated that AirAsia’s 2Q core net profit will come in at RM156.7 million, up 44.2% year-on-year (y-o-y) and 23.7% quarter-on-quarter. This is on the back of AirAsia’s passenger traffic growing 2.8% y-o-y in 2Q, with a load factor of 80%.

With the roll-out of three new ancillary products by year-end, Fernandes is optimistic that ancillary income will be a big driver for AirAsia going forward. He is targeting ancillary income per passenger to increase to RM60 within the next two to three years, from the current RM46.

In addition to launching WiFi products on board its flights by year-end, AirAsia plans to launch a foreign exchange service and duty free shopping on its flights.

Fernandes said the airline is not looking to compete head on with Malaysia Airports Holdings Bhd’s (MAHB) chain of Eraman duty-free retail shops, but is looking to grow the existing market.

“All evidence [indicates] that we are doing things right; the airline will also launch its foreign exchange service to give passengers the opportunity to carry foreign currency [exchange] electronically as opposed to cash.

“Because Malaysians spend a lot of time shopping and eating and we want to continue the shopping experience — so you can buy something on the plane and when you arrive, you can pick it up,” he said.

Earlier at the launch, AirAsia introduced its new courier service which is modelled after Amazon.com. Fernandes said the service provides customers up to 50% savings in cost compared with existing courier services.

Jointly marketed by R Box Asia Pte Ltd, a wholly-owned subsidiary of AirAsia, the new courier service is accesible to the public online at redbox.airasia.com.

Fernandes said with Redbox, the airline is looking to tap its extensive route network across 88 destinations and 22 countries, using the belly space of its existing fleet of 170 aircraft.

On reports that the airline is making headway in mending ties with MAHB, Fernandes said: “I think its CEO [chief executive officer] is very open-minded, and he wants to work with us.

“I think it’s tough times for the airport, traffic is down and we can change that. Trying to get the managers of both companies closer together,” he said.

Fernandes noted that AirAsia wants to improve the whole airport experience, from making it more lower cost to building bigger volume to attract more passengers to all of MAHB’s airports through the creation of new routes.

“If I were an airport operator I would want to get as many people [as possible] through the airport. We want MAHB to work with us and not against us, it’s a win win situation for everybody,” he said.

Fernandes also rubbished rumours that AirAsia has plans to acquire MAHB’s assets and the beleaguered national airline, Malaysian Airline System Bhd.

This article first appeared in The Edge Financial Daily, on August 15, 2014.