AirAsia Reports Q2 Profit

AirAsia Berhad has reported a core operating profit of RM128 million for the quarter period ending 30  June 2009, a 328% increase compared to the same period the year before.

Group CEO Tony Fernandes said, “Revenue for the  quarter grew by 8% to RM657 million driven by robust passenger growth and ancillary income. The core operating profit of RM128 million was more than quadruple the profits achieved in the same period last year.”

“Passenger numbers for the period grew by 24% to 3.5 million, largely in response to our three-prong strategy of lowering fares, stimulating travel with innovative and creative marketing and capturing market share. Despite lowering fares by an average of 19%, we still managed to produce strong profit growth with industry leading margins,” Mr Fernandes added.

While yield (Revenue per ASK) was lower by 12% to 11.9 sen per ASK (largely due to 19% lower average fare of RM160) the unit cost – at 8 sen per ASK – tumbled 31% compared to the same period last year.

Fernandes also highlighted the growing importance of ancillary income to the Company’s bottom line.

“Ancillary income grew by 89% to RM95 million. The average ancillary spend per passenger has increased by 52% to RM27. Ancillary income now represents 14.5% of total revenue, a 6 percentage- point increase from the same period last year,” Mr Fernandes said.

“With new products and services, this business unit is expected to grow – unearthing new revenue streams for the company. We have launched a low cost courier service and AirAsia Savers Account (co- branded savings account with CIMB) in July. There are six more ancillary income initiatives in the pipeline waiting to be launched within the year.”

On its overseas operations, Fernandes said, “AirAsia Thailand had performed well despite the weakened consumer sentiment caused by the domestic political situation, exacerbated by the second quarter being a seasonally weak quarter for Thailand. Yet AirAsia Thailand managed to contain losses to THB81 million (RM8.2 million) for the period. The outlook for Thailand is positive, the passenger growth numbers looks satisfactory and TAA has captured significant market share. In addition, the Thai operation is enjoying the cost benefits of the increased number of Airbus A320 aircraft in its fleet.”

He added, “AirAsia Indonesia’s operation has made commendable progress to improve its cost structure and narrow down losses to IDR65 billion (RM21.8 million). We have added a significant capacity addition of 56% in the period and this necessitated lower fare in order drive high traffic growth. This strategy has proven to be successful; we have carried 47% more passengers and maintained load factors of 75%. Despite the loss incurred in the second quarter, the third quarter looks very promising. Response to the new Bali-Perth route exceeded expectations and we have increased the frequency from once a day to twice a day even before the launch of the maiden flight. This will help underpin a sustained profitable performance going forward.”

“The current economic climate is well-suited for a low cost airline as consumers have become more price conscious and look for the best value. With our lowest unit cost base, we have the flexibility to reduce our already low fares without hurting our bottom line,” Fernandes added.

“Based on the forward booking trend, the underlying passenger demand in the third quarter remains positive. The passenger growth rate should be similar to the levels achieved in the first half of 2009.”

AirAsia continues to purchase fuel on the spot market. “The current fuel price, although higher relative to the first half of 2008, is substantially lower than the US$162 per barrel we paid in the third quarter 2008. Other cost items are expected to remain low as we extract further efficiency gains and benefits of economies of scale,” Fernandes said.

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