Moment of truth for Air Asia

[BC Tam 2]

AirAsia posts pre-tax loss of RM662.357m

 

KUALA LUMPUR, Feb 27 — AirAsia Bhd recorded a pre-tax loss of RM662.357 million for the financial year ended Dec 31, 2008, compared to a pre-tax profit of RM450.152 million in 2007.

 

Revenue, however, rose to RM2.640 billion from RM1.933 billion previously, due to higher passenger volume achieved and higher contribution from ancillary income, the low-cost carrier said.

 

During the year, passenger volume grew by 22 per cent compared in 2007, it said in a filing to Bursa Malaysia today.

 

AirAsia’s core operating profit was 19 per cent lower at RM171 million compared to RM211.147 million in 2007, largely due to a 47 per cent rise in the average jet fuel price.

 

The airline also recorded an exceptional item amounting to RM641 million which related to the provisions for unwinding its fuel and interest rate swap derivatives structures.

 

This was on view that the restructuring of derivative structure would safeguard the company from onerous mark to market swings, frees up equity and provide a stable cashflow, AirAsia said.

 

The unwinding cost is estimated to be fully recovered within eight months through savings derived from purchasing fuel and paying interest rates at spot market prices, it said.

 

On prospects, AirAsia said that despite that the current global economic crisis, it has managed to maintain its strong passenger traffic growth momentum as more passengers switched from full service carriers and used the airline as the primary air travel option.

 

The airline expects to carry 15 to 20 per cent more passengers this year, to be supported by the launch of new international services to destinations in India, China and Singapore. — Bernama

 

Looks like even disregarding fuel hedge losses, it's still red ink days, albeit quite minor

[Radzi 2]

Not a good time to be in the airline business.

[Waiping 12]

From an employee point of view these are truly a difficult time.

[Jessnor Arif 1]

I thought AK's Financial Year ended every March? :blink:

Have they "realign" their Financial Year with current year? When?

 

If last year is the year they "realign", this report then consists of only 3Q. not full 4Q. like MH Financial Year 2005.

[KK Lee 5]

If AK operating profit is $171m, unwinding cost is $641m and pre-tax losses is $662m, what constituted the missing $192m exceptional losses/cost?

 

 

[Azri M. 0]

A bit more in depth on the losses:

 

Exceptional item drags down AirAsia Q4 results

By YEOW POOI LING

 

 

NO-FRILLS airline AirAsia Bhd reported a net loss of RM176.9mil for the fourth quarter ended Dec 31 compared with a profit of RM245.7mil in the previous corresponding period due to an exceptional item of RM426mil related to the unwinding of its derivative structures.

 

Core operating profit, however, more than doubled to RM194mil for the quarter under review against RM94mil a year earlier. There was a translation gain of RM11mil from the ringgit recovery against the greenback.

 

Revenue jumped 32% to RM838.2mil from RM632.8mil a year earlier on improved passenger volume and higher ancillary income.

 

In a filing with Bursa Malaysia yesterday, the airline said passenger volume grew 21% while the average fare was 7% higher at RM229 from RM214 a year ago. Load factor improved to 78.4% from 77.8% previously.

 

AirAsia associate Thai AirAsia increased local market share to 40% as at end-December from 34% previously, despite the increased political disturbance that affected travel sentiment.

 

Its Thai and Indonesian operations’ share of unwinding losses was RM8.8mil and RM2.4mil respectively for the fourth quarter.

 

For the full year, AirAsia achieved a net loss of RM471.7mil from a profit of RM697.6mil in 2007 due to an exceptional item of RM641mil related to the provisions for unwinding fuel and interest rate swap derivative structures.

 

The 47% jump in the average jet fuel price dragged down the full-year core operating profit by 19% to RM171mil from 2007.

 

Revenue for FY08, however, rose to RM2.6bil against RM1.9bil in 2007, thanks to improved passenger volume and better ancillary income. Passenger volume grew 22% to 11.8 million in 2008 while the average fare was 11% higher.

 

Load factor was lower at 75.4% against 78.6% earlier on the back of a 29% growth in capacity in 2008. AirAsia had introduced 32 routes during the year and had a fleet of 75 aircraft as at end-December.

 

Group chief executive officer Datuk Tony Fernandes says the airline sold 20% more tickets from Jan 1 to Feb 25 this year versus the equivalent period in 2008.

 

“Our forward booking trend is consistent to last year’s and there is no letdown in terms of demand. We’re not feeling the same effects that other carriers are facing,” he told a briefing yesterday.

 

AirAsia, instead, is benefiting from the economic slowdown as people switch to better-value-for-money airlines.

 

It is taking delivery of 14 new Airbus A320 this year and returning nine Boeing 737-300 planes, giving a net addition of five to its fleet size.

 

The low-cost airline also plans to introduce 15 routes this year, mainly to new cities in India like Hyderabad, Mumbai, Bangalore, Delhi, Madras, Kolkata and Kochi, as well as looking to fly to Taipei.

 

Fernandes says AirAsia aims to carry 13.5 million passengers from Malaysia this year and 22 million passengers in total with the new routes and additional flight frequency. It aims to boost contribution from ancillary income to 15% from 9% in FY08. In addition, the recent introduction of Web check-in would provide some cost savings, he adds.

 

Fernandes says the total unwinding of its hedging contracts and interest rate swaps (IRS) in the fourth quarter would allow AirAsia to “start on a clean slate” in 2009.

 

It currently has 65% exposure in currency hedge pegged at an average rate of 3.20 against the dollar.

 

Meanwhile, the group’s long-haul airline, AirAsia X, will commence cargo service to and from Europe with the inception of its maiden flight on March 11 between Kuala Lumpur and Stansted, London.

 

[BC Tam 2]

Meanwhile, the group’s long-haul airline, AirAsia X, will commence cargo service to and from Europe with the inception of its maiden flight on March 11 between Kuala Lumpur and Stansted, London.

 

What ? Self loading cargo kah ?

[Tim Lee 6]

Has the bubble finally burst......

[BC Tam 2]

Anifah says EPF should reconsider AirAsia holdings

 

KUALA LUMPUR, March 2 — A prominent Sabah lawmaker wants the Employees Provident Fund (EPF) to review its investments in loss-making companies like AirAsia Bhd.

 

Instead Datuk Anifah Aman, the leader of the Barisan Nasional (BN) parliamentary backbenchers, says EPF should consider distributing its reserves to contributors to help cushion the impact of the impending economic recession.

 

“Why does EPF continue investing in companies like AirAsia?

 

“If EPF invests in companies which make money then we will see higher dividends for contributors,” he told The Malaysian Insider.

 

Last Friday, AirAsia Bhd recorded a pre-tax loss of RM662.357 million for the financial year ended Dec 31, 2008, compared to a pre-tax profit of RM450.152 million in 2007.

 

EPF has in the past one year increased its shareholdings in AirAsia from just under five per cent at the end of 2007 to just under 10 per cent in January.

 

While AirAsia is projected higher revenue this year, the prospects for the global airline industry remain gloomy.

 

Anifah’s remarks about EPF investments, comes on the heels of his criticisms last week of underperforming government-linked-companies (GLCs) such as Telekom Malaysia Bhd and Tenaga Nasional Bhd.

 

EPF is also a substantial shareholder in Telekom and Tenaga.

 

Anifah, who blames the government’s handpicked young professionals for the poor performance of the GLCs, says the poor results, was causing the government to lose billions of ringgit in extra funds it could rely on.

 

“The difference between the private sector and GLCs is that these so-called experts which were brought in by the government have no experience.

 

“If all the GLCs were performing to par we would have a few billion extra to use for cushioning the impact of the economic recession,” he said.

 

He said the government must consider a change of management at GLCs which are experiencing losses.

 

from here

 

Ouch !

[klampertz 0]

why should people even bother what this UMNO goon has to say...he should stick to taking care of people in his own constituency first

Edited March 2, 2009 by klampertz

[Waiping 12]

At the moment this guy is ok. We should be focusing on the issue than the people who bought it up. I pay EPF and off course I would be concern with my money.

[Naim 6]

why should people even bother what this UMNO goon has to say...he should stick to taking care of people in his own constituency first

 

I think he has a point.

[klampertz 0]

At the moment this guy is ok. We should be focusing on the issue than the people who bought it up. I pay EPF and off course I would be concern with my money.

 

i pay EPF too and so does a lot of people in this forum.but worrying about the investment made in airasia is trivial relatively as EPF has bundles of company that they are investing.airasia is not the only suffering losses.

 

I think he has a point.

 

nothing personal against anifah aman but this is a typical reaction by UMNO goons who are a brainless lot.its better he kept his piehole shut

Edited March 7, 2009 by klampertz

[BC Tam 2]

24 Apr 2009

New Outlet Opening Announcement: PARKSON @ 1 Borneo, Kota Kinabalu, Sabah.

 

PARKSON Department Store Will Open a new outlet in East Malaysia’s largest shopping mall – 1 Borneo Hypermall.

 

The opening of Parkson at 1 Borneo will be Parkson’s 2nd outlet in Kota Kinabalu and the 7th outlet in East Malaysia. Parkson Department Store will be the new anchor tenant of 1 Borneo with a retail space of 110,000 sq. ft. over 2 floor of shopping (Ground & 1st Floor). The location of this new PARKSON outlet will replace the present Tune Store at Centre Atrium. The handover for renovation is targeted for the 2nd half of June and schedule for opening in the 1st half of August. With a common objective, Parkson will work closely with Sagajuta (Sabah) Sdn. Bhd., in developing 1 Borneo Hypermall to be the preferred shopping destination in Sabah.

 

.........

 

read in full here

 

ok, maybe it's unwise to read too much into a single event .................

[Isaac 0]

That is kind of expected. Nobody is going to Tune Store. It is only a matter of time before they shut down the business. People still prefer to shop in TONG Enterprise in Wisma Merdeka.

[flee 5]

If you look at the results, AirAsia's operations are healthy. They decided to take all losses from fuel hedging and interest rate swaps into last year's accounts so that they have a clean balance sheet for 2009. Don't be surprised if AirAsia posts big profits in 2009, if oil prices don't go up.

 

I think AirAsia needs to strengthen their treasury team - that is why Tony Fernandes has put priority to that. He is recruiting a Head of Ancillary Income in his blog and in Facebook and Twitter. This is an area that can contribute to the group's income and profits as AirAsia has substantial income from forward bookings. They need to make the money work harder and generate returns even before the passenger flies.

 

I think AirAsia's main challenge is the red tape of the Malaysian and foreign governments. I am not confident that the permanent LCCT will be built on time. MAHB works like a govt. department, i.e. slow and illogical decision making... So it has to be more inventive in making the low cost model work. AirAsia's core operations looks OK but the non-airline operations part of things is putting the brakes on its expansion.

 

Tune Money is another worry as it failed to take off. Now they are tying up with CIMB. If Tune Money can contribute more to the group, then things can improve.

 

AirAsia needs all its group companies to pull their weight. Then it will definitely be a huge success.

[Waiping 12]

As if Parkson will bring more customer to 1Borneo.

[Ryan Soh 3]

KK needs a place like 1Borneo. Malls like Centerpoint and the likes are already showing their age and crumbling as we speak. Although situated a little out of the way, perhaps 1Borneo's location can help ease the small city center's traffic a little.

 

If you do not have new malls, people will start commenting on how boring KK is. Build new malls, people also comment who wants to go... So how like that? Trust me, 1Borneo will ease into it's existence in time to come and perhaps bring some life to the surroundings.

 

[BC Tam 2]

Malls like Centerpoint and the likes are already showing their age and crumbling as we speak

Aiyoah !

We have had our more than fair share of crumbly buildings here oledi

Three at last count

[KC Sim 2]

Not related to the original topic . . . but nevertheless something about AirAsia.

 

9M-AFC emerged this morning from the ST Aerospace hangar in Seletar Airport in Singapore wearing a new livery celebrating its Skytrax World's Best Low-cost Airline award for 2009.

 

It wears the basic AirAsia livery but has billboard "WORLD'S BEST" title and smaller "Low-cost Airline" titles with a big gold Skytrax award logo on the foreward fuselage.

 

It departed Seletar Airport at 1515hrs and should arrive in KUL before 1600hrs.

 

KC Sim

[zeqa 1]

KK needs a place like 1Borneo. Malls like Centerpoint and the likes are already showing their age and crumbling as we speak. Although situated a little out of the way, perhaps 1Borneo's location can help ease the small city center's traffic a little.

 

If you do not have new malls, people will start commenting on how boring KK is. Build new malls, people also comment who wants to go... So how like that? Trust me, 1Borneo will ease into it's existence in time to come and perhaps bring some life to the surroundings.

 

yes: true- 1B is the talk of the town here in Burnei Also there's two new mall coming up.i.e Times sq & Suria Sabah- i wonder when they will be completed?

Edited May 11, 2009 by zeqa

[BC Tam 2]

..... i.e Times sq & Suria Sabah- i wonder when they will be completed?

First part of Times Sq already occupied for about a year or so already, not very high traffic

Next part (with proposed Parkson anchor) still at foundation level, not much construction activity in evidence when I passed by yesterday

 

Suria Sabah is targetting for Oct opening I believe. Hope not though, not unless they want a repeat of the 1B opening fiasco

[Isaac 0]

Suria Sabah is targetting for Oct opening I believe. Hope not though, not unless they want a repeat of the 1B opening fiasco

And according to Metrojaya, the anchor tenant of Suria Sabah will open its door there next year. Was hoping it is Jaya Jusco that will be the anchor tenant there ... too bad.