AirAsia X Reports 38.5% Revenue Growth in H1 2014

AirAsia X Berhad, the long-haul low-cost airline affiliate of the AirAsia Group, has reported its financial results for the Second Quarter and the First Half-Year ended 30 June 2014.

On the back of its strategy of capacity and network expansion, the company recorded revenue of RM671.6 million for Q2 2014, a y-o-y growth of 36.7%, and cumulative revenue of RM1.42 billion in H1 2014, a 38.5% y-o-y growth compared to the previous corresponding period.

This increase was underpinned by the significant growth in Available-Seat-Kilometres (ASK) capacity that was introduced in the second-half of 2013, recording a y-o-y growth of 47% to 6.26 billion in Q2 2014 and a y-o-y growth of 53% to 12.48 billion in H1 2014. Passenger traffic volume in Revenue-Passenger-Kilometre (RPK) grew by 44% in Q2 2014 to 5.04 billion and by 53.3% to 10.38 billion in H1 2014, resulting in a passenger load factor of 80.4% in Q2 2014 and 83.1% in H1 2014.

The capacity expansion into new cities in its core markets, such as Nagoya, Xian, and Chongqing, as well as additional frequencies to cities such as Sydney, Melbourne, Taipei, Seoul, and Tokyo have increased its Fly-Thru connectivity and attracted new passenger traffic flow that now uses KLIA2 as a regional aviation hub. Notably, the company has approximately tripled its market share of passengers travelling between North Asia and Australia on a one-stop service, generating a significant new customer base this year compared to the previous year.

The company continues to operate a higher number of flights for charters and wet-leases, with total revenues from this segment growing from RM33.0 million in 1H13 to RM148.6 million in H1 2014. These flights are not captured in the ASK and RPK tabulations as they are unscheduled flights.

Ancillary revenue grew by 48.2% y-o-y to RM290.8 million in H1 2014, compared to RM196.3 million in the previous period, resulting in an ancillary revenue per passenger of RM138.50 from the 2.1 million passengers carried.

The cargo segment contributed RM59.3 million for H1 2014, and increase of 43.8% y-o-y from the previous corresponding period.

Two A330-300 aircraft were leased to Thai AirAsia X [see video below], its affiliate, generating RM25.3 million in lease income revenue in H1 2014. TAAX commenced daily flights to Seoul since 17 June 2014 and will operate flights to Tokyo-Narita and Osaka from its hub in Bangkok from September 2014.

The resultant unit-revenue yield, as measured by Revenue-per-Available-Seat-Kilometre (RASK) was 10.79 sen in Q2 2014, a -7% y-o-y decline, and 11.44 sen in H1 2014, a -10% y-o-y decline. The rate of decline in RASK has been steadily improving from -15.1% in 4Q13 and -12.4% in Q1 2014.

Based on forward sales to-date and barring any unforeseen macro-factors, the company expects RASK to resume positive growth in the second-half of this year, as the capacity expansion last year matures and the rate of capacity growth progressively slows down. Although the RASK yields have declined this year from 2013, they remain higher than the RASK yields recorded in 2010, 2011, and 2012, signaling overall route network portfolio maturity. The company continues to target a positive growth in RASK for the full year of 2014 from 2013.

Operating expenses increased 61.5% y-o-y from RM986.3 million to RM1,593.1 million in H1 2014. Although unit-cost as measured in Cost-per-Available-Seat-Kilometre (CASK) increased 4.6% y-o-y to 12.69 sen, CASK-excluding fuel declined -2.6% y-o-y to 6.35 sen. CASK in US cents declined -1.4% to 3.89 cents, due to the effect of the US dollar-Malaysian Ringgit currency movement, as a majority of costs, especially fuel, aircraft and engineering expenses, are denominated in US dollars. CASK excluding fuel in US cents dropped -8.5% to 1.94 cents. Average fuel price increased from US$127/barrel in 2Q13 to US$130/barrel in Q2 2014. Controllable items such as staff costs, sales and marketing expenses, fell -13% y-o-y from cost controls and productivity improvements achieved from having larger operating scale.

Earnings Before Interest, Tax, Depreciation, Amortisation and Rental dropped from RM183.5 million to RM53.5 million, while Earnings Before Interest and Tax dropped from RM46.0 million to –RM168.5 million. AAX recorded a Loss After Tax of –RM140.1 million for H1 2014 compared to a Profit After Tax of RM17.9 million in the first-half of 2013.

The company continues to maintain positive operating cash flow in Q2 2014 of +RM81.2 million, and +RM212.8 million for H1 2014. Net Cash Flow was also positive at +RM12.8 million in Q2 2014, as there were no capital expenditure incurred from financing aircraft on-balance sheet (the additional aircraft was on operating lease), no material new pre-delivery-payment financing for future aircraft, and no further capital investments in Associates. The company expects to maintain positive operating cash flow and positive net cash flow for the full year, on the back on an expected stronger performance in the second-half of 2014.

Azran Osman-Rani, CEO of AirAsia X said, “Although our capacity expansion has put short-term pressure on earnings performance, the long-term strategic advantages are very compelling. We now have our strongest route network, with multiple cities in each of our markets, and strong frequencies that lead to convenient transfer connections. As we now have achieved overall market leadership, we have stablised our network, with quarter-on-quarter ASK growth slowing down to single-digit rates. Coupled with our position as the lowest unit-cost airline operator and leveraging on the strength of the AirAsia global brand and customer base, we have an unrivalled strong position for the future.

“As we approach the end of the year after twelve months since we added a lot of new capacity in Q4 2013, we expect RASK yields to return to positive growth and reach the levels recorded before the expansion. This in turn will return us back to profitability, particularly as global fuel prices are expected to soften, while Asian currencies are expected to stabilise. We are already seeing yields catch up in Taipei, the first route to have a doubling of capacity to twice-weekly services that commenced in July 2013.

“Thai AirAsia X has been off on a great start, achieving a record 88% average passenger load factor in its first 3 months of operations on its inaugural Bangkok-Seoul route. The investments in international associates gives us more room for further  growth and strengthens our market position in each of our destinations as customers have multiple direct flight options to choose from.

“The 50 next-generation A330-900neo aircraft ordered will give us a huge lead over other players in this space, and ensure that we can fully realise our growth potential from the two new hubs that we have invested in, as well as other future hubs once the opportunity materialises”, concluded Azran.

Thai AirAsia X Airbus A330-300 Aircraft Tour

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