AirAsia sees 2017 results surpassing 2016 despite lower 1Q earnings
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AirAsia, Asia’s largest budget airline, saw net profit drop 29.8% to RM615.81 million or 18.4 sen a share in the first quarter ended March 31, 2017 (1QFY17) from RM877.79 million or 31.5 sen a share a year ago, mainly due to higher fuel costs as average fuel price rose 20% to US$67 (RM286.18) per barrel in 1QFY17 from US$56 per barrel in 1QFY16 and a strong US dollar.
Staff costs also went up sharply by 27% year-on-year to RM363.5 million in 1QFY17, mainly due to a revised staff remuneration package that was introduced in 4QFY16. As a result, total net operating profits fell to RM267.1 million in 1QFY17 from RM337.7 million in 1QFY16. However, the airline remains positive about its prospects in 2017 and is optimistic that the 2017 results may surpass that of 2016, it said in a filing with Bursa Malaysia yesterday.
For the remaining quarters of 2017, AirAsia said it remains optimistic as it continues to observe strong demand across most sectors coupled with a favourable fuel price and foreign exchange environment.It is projecting to achieve an average forecast load factor of 91% in 2QFY17 based on the existing forward booking trend. “The strong demand is expected to derive from the festive Hari Raya season, in conjuction with the midterm school holidays in India, as well as the expanded South Korea and China network from the Philippines,” it added.
AirAsia’s quarterly revenue jumped 31% to RM2.23 billion in 1QFY17 from RM1.7 billion in 1QFY16 due to the consolidation of Indonesia AirAsia (IAA) and Philippines AirAsia (PAA) Group during the current quarter under review. AirAsia said the improved quarterly revenue growth was also derived from a 6% increase in total passengers carried on an additional 1% growth in seat capacity, as well as a strong seat load factor of 89% in 1QFY17 compared with 85% in 1QFY16. Despite of a slight reduction in the average fare of 2%, overall revenue per available seat kilometre improved 3% to 14.91 sen in 1QFY17 from 14.42 sen in 1QFY16. Its cost of available seat kilometre (CASK), however, rose 14% to 13.61 sen in 1QFY17 from 11.97 sen in 1QFY16, while non-fuel CASK increased 9% to 8.6 sen from 7.87 sen.
In a separate statement yesterday, AirAsia group chief executive officer Tan Sri Tony Fernandes said following the completion of the capital injection exercise in January, the airline’s net gearing ratio stood at 1.22 times at the end of 1QFY17 compared with 1.33 times at the end of 4QFY16. “With the start of consolidated accounts combining our Malaysia, Indonesia and Philippine units, we are taking a major step to being recognised as one airline, not many. AirAsia as OneAirAsia, sharing a single cost structure, brings immense benefits in terms of economies of scale and building a dominant position in the markets we operate in. We hope to include Thai AirAsia in our consolidated accounts beginning the second quarter,” he said.
“He said the airline will add 29 new planes this year through a combination of finance and operating lease, bringing the total fleet to 201 aircraft by end-2017.”
He said the airline will add 29 new planes this year through a combination of finance and operating lease, bringing the total fleet to 201 aircraft by end-2017. “This is the most number of aircraft we have added in four years, demonstrating our confidence in the competitive environment in Asia.
“In March this year, we signed a joint venture in Vietnam and later another in China in early May. Adding these two countries will give us air operator certificates in a total of eight Asian countries, and with that, unrivalled connectivity within the region,” he also said.
The airline is also expected to achieve 10% further savings by end-2017 as it moves towards regional consolidation and streamlining group operations across the board. It also plans to grow its ancillary target per passenger from RM50 to RM60 this year.
“In generating returns for our shareholders, we hope to monetise our non-core assets and distribute a special dividend every two years. We are currently in final negotiations and will materialise the sale of Asia Aviation Capital, our leasing arm, very soon. We continue to work toward the listing of PAA and IAA and our training centre — AirAsia Aviation Centre of Excellence,” said Fernandes.
Questions & Answers
Q.What were the primary reasons for AirAsia's drop in net profit during the first quarter of 2017?
What were the primary reasons for AirAsia's drop in net profit during the first quarter of 2017?
The main causes were higher fuel costs, with average fuel prices rising 20%, and a strong US dollar. Also, staff costs increased sharply by 27% year-on-year due to a revised remuneration package introduced in the previous quarter.
Q.Despite the first quarter results, why does AirAsia remain optimistic about its full-year performance?
Despite the first quarter results, why does AirAsia remain optimistic about its full-year performance?
AirAsia expects strong demand across most sectors for the remaining quarters of 2017. This is coupled with a favourable fuel price and foreign exchange environment, and anticipated demand from festive seasons and network expansion.
Q.How did AirAsia's revenue increase in the first quarter, despite the drop in net profit?
How did AirAsia's revenue increase in the first quarter, despite the drop in net profit?
Quarterly revenue jumped 31% due to the consolidation of Indonesia AirAsia and Philippines AirAsia Group. It also benefited from a 6% increase in total passengers carried and a strong seat load factor of 89%.
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