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AirAsia Q2 net profit after tax rises to RM198.9m

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AirAsia Bhd, a Malaysian budget carrier, said second-quarter net income rose to RM198.9 million from RM139.2 million a year ago.

 

Revenue climbed to RM940.7 million in the three months ended June 30, from RM748 million a year earlier, it said in a statement today. -- Bloomberg

 

AirAsia Q2 2010 Announcement

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KUALA LUMPUR, August 18 (Bernama) -- AirAsia Bhd's pre-tax profit rose 4.38 per cent to RM144.213 million for its second quarter ended June 30, 2010, from RM138.161 million in the same quarter last year.

 

Revenue increased 25.76 per cent to RM940.656 million from RM747.996 million previously, it said in a filing to Bursa Malaysia on Wednesday.

 

"The revenue growth was supported by 11 per cent growth in passenger volumes and average fare that was eight per cent higher at RM173 as compared to RM160 achieved in second quarter last year," the budget carrier.

 

For the first six months of this year, AirAsia reported higher pre-tax profit of RM400.400 million compared with RM262.279 million recorded in the same period last year.

 

Its revenue also jumped to RM1.819 billion from RM1.545 billion previously.

 

AirAsia said the group's cash from operations was at RM188 million, a decrease of RM108 million against the immediate preceding quarter ended March 31, 2010.

 

Commenting on prospects, AirAsia said based on the current forward booking trend, the underlying passenger demand in the third quarter and fourth quarters for the Malaysian, Thai and Indonesian operations remained positive.

 

The airline said load factors achieved in July were in line with the prior year, while there have been significant improvements in yield.

 

"Barring any unforeseen circumstances, the directors remain positive with the prospects of the group for the second half of 2010," it said.

 

AirAsia said it will take delivery of six A320 aircraft in the third quarter of the year, two of which will be operated in Malaysia and four in Thailand.

 

In the fourth quarter, four A320 aircraft will be delivered, one of which will be operated in Malaysia and three in Indonesia, it said.

 

The new aircraft will be used to replace the B737s and provide additional capacity across the network.

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KUALA LUMPUR, Aug 18 – Leading budget airline AirAsia reported RM199 million in profit for its second quarter today, up from RM139 million during the same period last year thanks to strong performance at its regional subsidiaries.

 

AirAsia’s 43 per cent rise in net profit contrasted with national carrier Malaysia Airlines which reported a second quarter net loss of RM535 million, partly due to RM217 million in derivative losses from fuel hedging.

 

AirAsia Thailand reported a net profit of THB49 million (RM4.89 million) as compared with a loss of THB80 million (RM7.97 million) during the same period last year while AirAsia Indonesia reported a net profit of IDR111 billion (RM38.95 million) in the second quarter as compared with a loss of IDR64 billion (RM22.46 million) last year.

 

AirAsia CEO Datuk Seri Tony Fernandes said that he expects the Thai and Indonesian operations to continue to grow strongly.

 

“I am confident of a strong second half performance in Thailand,” he told analysts and media in a briefing today. “Indonesia is going to go from strength to strength.”

 

AirAsia hedges 26 per cent of its fuel as opposed to Malaysia Airlines which hedged 60 per cent of its fuel requirement for 2010 and 40 per cent of its fuel requirement for 2011 at US$100 per barrel.

 

“We don’t try to bet where the market is going,” said Tony. “We just match forward sales with hedging.”

 

He added that he does not expect the new low cost carrier terminal (LCCT) to be ready by 2012 as originally projected by Malaysia Airports Holdings Berhad “but more like 2013”.

 

AirAsia enjoyed an 11 per cent increase in passengers during the quarter under review to 3.9 million while revenue rose 26 per cent from RM748 million last year to RM941 million.

 

Fernandes said that he expects the airline to perform strongly over the next two quarters due to “very good” forward bookings.

 

“The fourth quarter is traditionally our strongest quarter,” he said. “To head into our strongest season on the back of soaring first quarter and a record breaking second quarter puts us in a fantastic position.”

 

 

Source: http://www.themalaysianinsider.com/business/article/airasia-net-profit-up-43pc-on-strong-regional-business/

Edited by flee

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Good job AK. Even with 7x RM17 tickets I just bought they can make money like this :D

 

pax like us are subsidised by the others, who buy last minute. :)

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I think AirAsia has changed the travelling habits of many of us forever. I remember laughing at the British when they plan their summer holidays in December, more than 6 months ahead. Now, most people who take advantage of their cheaper tickets plan their flights up to 11 months ahead!

 

Looks like Tony Fernandes is not confident that MAHB can keep to their revised completion date of the permanent LCCT. That was why they had to defer more aircraft deliveries.

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I really don't know how they do it. They probably have to work harder since they're not backed by the Govt so they'll have to be super efficient unlike the other airline that is backed by the Govt so they can afford to be not so efficient besides some really really good management from TF's team. What do you guys think?

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AirAsia Q2 net profit 43% up on higher passenger load

PETALING JAYA: AirAsia Bhd’s net profit jumped 43% to RM198.9mil for the second quarter ended June 30, from RM139.2mil a year ago, on the back of strong growth in passenger volumes, ancillary income and higher average fares.

 

Its revenue for the quarter was 26% higher at RM940.6mil from RM747.9mil a year ago. It reported earnings per share of 7.2 sen versus 5.9 sen a year ago.

 

For the six months ended June 30, AirAsia posted a net profit of RM423mil on revenue of RM1.82bil.

 

While AirAsia posted a record quarter, Malaysia Airlines posted a net loss of RM535mil due mainly to derivative losses from its fuel hedges. MAS’ revenue stood at RM3.2bil for the quarter ended June 30.

 

In a teleconference yesterday, group CEO Datuk Seri Tony Fernandes was confident of a strong second half for AirAsia. He sees a tremendous upside for its operations in Thailand and Indonesia while its ancillary income registered massive growth.

 

“Forward bookings are looking very good, The fourth quarter is traditionally our strongest quarter. To head into our strongest season on the back of a soaring first quarter and a record-breaking second quarter puts us in a fantastic position,” he said.

 

During the second quarter, the group’s core operating profit for the period was RM168.5mil, a 31% increase over RM128.4mil core operating profit achieved a year ago.

 

The core operating profit margin for the period was at 17.9%, 0.7 percentage point higher than the 17.2% core operating profit margin achieved a year ago.

 

“There were no unrealised translation gains in the quarter as gains from the slight strengthening of the ringgit were offset by losses from the change in the fair value of currency derivatives,” it said in the notes accompanying AirAsia’s financial results.

 

Commenting on its ancillary growth, Fernandes said: “We have actually reached our target of RM40 spending per pax that we set for the last quarter. We have unearthed a gushing revenue stream that can boost the bottom line and also serve as a buffer to rising fuel prices.”

 

He said baggage fees and AirAsia Cargo were significant contributors to ancillary income for the group.

 

Meanwhile, AirAsia’s associates Thai AirAsia Co and Indonesia AirAsia recorded good performance in the second quarter.

 

“Indonesia AirAsia has staged a strong turnaround and we expect greater things,” Fernandes said, adding that passenger volume grew by 10% year-on-year to 947,786 from 863,440 last year.

 

In the second quarter, Thai AirAsia recorded a net profit of RM4.9mil on revenue of RM267.4mil while Indonesia AirAsia’s net profit rose to RM39.6mil on revenue of RM233.2mil.

 

During the quarter, the group carried a total of 6.07 million passengers while the load factor increased to 77% from 75% in the same period last year.

 

Fernandes said its cost per average seat per km (ASK) of 3.62 US cents was mainly due to higher average fuel cost. He said the average fuel price in the second quarter was US$100 per barrel against US$60 a barrel in the same period last year.

 

However, its revenue ASK grew by 26% to 4.88 US cents in the second quarter from 3.87 US cents perviously. “I think we remained prudent with hedging, but it’s very useful too – that we’re not trying to bet where the market’s going, we’re just trying to match our forward sales with our oil hedging,” he said when asked on its hedging status.

 

Fernandes said its net gearing was expected to improved after the deferment of aircraft in 2011. “We have deferred seven A320s for 2011 to 2015. We are planning to reduce aircraft deliveries to 10-12 from 2012 onwards,” he said. He expected AirAsia’s gearing ratio to be below two times from 2011 onwards.

 

On aircraft financing, he said the financing for all the aircraft in 2010 was secured. As of June 30, the group has a total of 85 planes. Of the total, 50 planes are for Malaysian operations, while Thailand has 20 and Indonesia 15.

 

Fernandes was confident that the group’s cash balance would surpassed RM1bil by year-end. It has a current cash balance of RM858mil.

 

“We’ll easily surpass that by year-end. We will be getting re-payment from our associates in Thailand and Indonesia.” He added that with the listing of associates, the amount due from associates could potentially be converted to new shares to maintain shareholding in Thai AirAsia and Indonesia AirAsia.

 

“It is very premature for me to comment. We believe we have a very strong brand in Thailand. We are not duly concerned. We are not focusing on our competitor, but ourselves,” Fernandes said when commenting on Tiger Airways’ venture into Thailand.

 

Analysts contacted said AirAsia’s strong performance was above their expectation.

 

“They (AirAsia) did superbly despite the significant rise in the fuel bill due to the higher oil prices. And that’s largely thanks to the strong growth in ancillary income which sort of ‘offset’ the higher fuel expenses. The deferment of aircraft significantly reduces the debt burden, and should contribute positively to earnings via lower financing costs and better yields through higher loads,” an analyst said.

 

Another analyst said AirAsia’s operational numbers look very good and were slightly above his expectations.

 

Source: http://biz.thestar.com.my/news/story.asp?file=/2010/8/19/business/6881852&sec=business

 

From Business Times:

 

Budget carrier AirAsia Bhd (5099) posted a 43 per cent growth in its second quarter net profit of RM198.93 million, mainly due to a deferred tax credit recognition of RM58.7 million.

 

But the airline's revenue for the three months ended June 30 2010 was up 26 per cent to RM940.66 million due to higher passenger volumes and a rise in average fares.

 

Group chief executive officer Datuk Seri Dr Tony Fernandes said forward bookings for the second half of the year looked good.

 

"September will be a strong month for us given the Muslim religious holiday, more so for Malaysia and Indonesia," he told analysts during a conference call on the company's results yesterday.

 

The airline will continue to grow its market in India, especially from its other hubs in Thailand, and continue to connect the Asean capitals from Kuala Lumpur.

Load factors are expected to climb as these routes begin to mature.

 

Fernandes said that the second quarter results was the first time that AirAsia and two of its associates in Thailand and Indonesia have made a good profit whereby both are reaping the benefits from the replacement of the older B737 aircraft with new A320 planes.

 

Listing plans for both associates will be within the next 12 months, he added.

 

AirAsia carried some 3.9 million passengers for the second quarter, an 11 per cent year-on-year growth while the average fare was up 8 per cent to RM173.

 

Ancillary income jumped 59 per cent to RM43 per passenger. Load factor also gained 2 per cent to 77 per cent from a year ago.

 

AirAsia Thailand posted a net profit of 49 million baht (RM4.9 million) in the quarter compared with a loss of 80 million baht (RM7.9 million) a year ago.

 

Its revenue grew 30 per cent to 2.66 billion baht (RM265 million) due to a 11 per cent passenger volume growth, stronger ancillary income contribution and improving yields.

 

AirAsia Indonesia made a net profit of 111 billion rupiah (RM39 million) in the second quarter from a loss of 64 billion rupiah a year ago.

 

Its revenue was up 44 per cent to 656 billion rupiah (RM229m million) due to a rise of passenger volumes by 10 per cent, 88 per cent growth in ancillary income per passenger and higher base fares.

 

"AirAsia Indonesia has grown from strength-to-strength and this is its best quarter ever. We plan on continuing the expansion of its international routes," said Fernandes.

 

For the first half of the year, AirAsia saw its net profit rising by 24 per cent to RM423.04 million and revenue growing by 18 per cent to RM1.82 billion.

 

Sourece: http://www.btimes.com.my/Current_News/BTIMES/articles/jdoc-2/Article/index_html

 

This is something from CAPA:

 

WEAKNESS - Outgrowing its LCCT hub

A key concern for AirAsia is that it is outgrowing its Kuala Lumpur (low cost carrier terminal) LCCT hub, obliging the carrier to defer deliveries of its A320 orders for 2011 to "address capacity constraints" at the LCCT. However, while a concern, the decision could be a blessing in disguise, as its forces the carrier to maintain sustainable growth. The carrier added that no penalty cost was imposed by Airbus for the deferrals. AirAsia is necessarily a large Airbus customer.

 

Meanwhile, the carrier stated it is seeing the "maturing" of some routes, resulted in lower average fare increases than its subsidiaries, of 8%. This 'maturing' also moderated the growth figures of the carrier, compared to its newer and fast-growing subsidiary carriers.

 

Head over here for the full and comprehensive analysis: http://www.centreforaviation.com/news/2010/08/19/airasia-reports-record-quarter-in-2q2010-43-surge-in-profits-ancillary-revenue-and-passengers-i/page1

 

I really don't know how they do it. They probably have to work harder since they're not backed by the Govt so they'll have to be super efficient unlike the other airline that is backed by the Govt so they can afford to be not so efficient besides some really really good management from TF's team. What do you guys think?

How about this?

 

"A gushing revenue stream" of ancillaries: The importance of ancillary income to AirAsia’s business strategy is, meanwhile, growing rapidly, with the strong increases helping compensate for fuel price increases, with the carrier adding that baggage fees and AirAsia Cargo are the key contributors to ancillary income.

 

During the quarter, Asia’s largest LCC benefited from an extreme 76% increase in ancillary revenue in the period to USD53.1 million (with a 59% increase for Malaysia operations, a 40% gain in Thailand and a notable 88% increase in Indonesia), with ancillary revenue growth outpacing overall growth in the period and across the carrier’s operations. Ancillary revenue increased to represent 18% of total revenues in the quarter, a 2 ppt year-on-year increase.

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Looks like Tony Fernandes is not confident that MAHB can keep to their revised completion date of the permanent LCCT. That was why they had to defer more aircraft deliveries.

 

 

Yep,, he like to do that,,, so its not their bad planning... but point fingers to others .... and derive to their decision... :finger:

 

I really don't know how they do it. They probably have to work harder since they're not backed by the Govt so they'll have to be super efficient unlike the other airline that is backed by the Govt so they can afford to be not so efficient besides some really really good management from TF's team. What do you guys think?

 

If you really don't know ... its best to keep it that way... and please try not to slander others,, as I said if you don't know its best to keep it that way.

 

Affnan

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If you really don't know ... its best to keep it that way... and please try not to slander others,, as I said if you don't know its best to keep it that way.

 

Affnan

 

My bad. :pardon:

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I really don't know how they do it. They probably have to work harder since they're not backed by the Govt so they'll have to be super efficient unlike the other airline that is backed by the Govt so they can afford to be not so efficient besides some really really good management from TF's team. What do you guys think?

I think you are spot on over there. I think AK really does have some very good managers, especially those who are handling their ancillary income and fuel hedging matters. And the company itself does not have a significant shareholdings by any government agencies thus it is free from 'national services' that MH has to endure. Let see, here is MH's P&L for the period of January - June 2010:

 

MHQ22.jpg

 

Their 'Pax Revenue' rose 20.4% ([3,689-3,064]/3,064) but the corresponding 'Surcharges' declined by 14.9% ([769-904]/904), which should not be the case as it proves that there is a major flaw in their yield management as far as surcharges collection is concerned. Logically, surcharges should be in tandem with 'Pax Revenue'. Now let say if MH managed to collect the surcharges by 20.4% increase margin too, the surcharges amount will be MYR 1,088,416,000 which can easily added a whopping MYR 319,416,000 to their revenue figure.

 

I am actually very curious on why MH takes this losses on fuel hedging matters like it is not a big deal at all as if it is all 'takdir'. And this quarter is not the first time losses on derivatives occurred. Each time it happened, the amount is nothing less than a 9 figures digit. But we don't hear any termination and sacking being done. The CFO is still the same person, and I am quite sure the person in charge of fuel hedging and yield management are still the same person too.

 

Taking cue from another GLC in Malaysia,

 

Wednesday June 11, 2008

 

Sime Darby sacks CFO

By HANIM ADNAN

http://biz.thestar.com.my/news/story.asp?file=/2008/6/11/business/21515422&sec=business

 

KUALA LUMPUR: Sime Darby Bhd on Monday sacked its chief financial officer (CFO) and another senior executive following an in-depth inquiry into RM120mil losses from crude palm oil (CPO) futures trading.

 

The services of group CFO Razidan Ghazalli and group vice-president (1) of downstream and biofuel Muhamad Mohan Kittu Abdullah were terminated with immediate effect.

 

b_01razidan.jpg

Razidan Ghazalli

 

In a statement yesterday, Sime Darby said the trading losses at Golden Jomalina Food Industries Bhd, a subsidiary of Golden Hope Plantations Bhd (GHope), were discovered in August 2007, several months before the merger of GHope, Kumpulan Guthrie Bhd and Sime Darby.

 

Shortly after the losses were discovered, KPMG Forensic was engaged to conduct an investigative review of the futures trading operations at Golden Jomalina.

 

The forensic accountants completed their report and handed it to Sime Darby this year. The issue was deliberated by the group’s board of directors at a meeting on May 28.

 

After having reviewed the forensic accountant's report and findings by a panel of independent directors set up by the audit committee, Sime Darby’s board determined that the persons concerned had failed to discharge their functions to the standard of care that were reasonably expected of them.

 

Razidan was GHope’s finance director while Muhammad Mohan was Jomalina’s general manager when the losses were racked up through futures trading between October 2006 and August 2007.

 

According to a Sime Darby spokesman, appropriate provisions had been made and the group would not have its future profitability affected by the past losses.

 

He added that measures had been taken to strengthen processes and trading parameters.

 

“The decision to terminate the services of the two staff members was taken after an extensive process of investigation and deliberation. While it is never a pleasant task to dismiss any personnel, the board felt that the move was necessary in the interest of accountability and to protect stakeholders of Sime Darby,” said the spokesman.

 

Meanwhile, industry analysts contacted by StarBiz said the RM120mil trading losses would not have an impact on their earnings forecasts on Sime Darby as the group confirmed that it already made ample provisions to account for the losses.

 

A plantation analyst with a bank-backed brokerage said while the revelation (of the losses) might raise concerns among investors, Sime Darby had made the right decision to make its top staff accountable for the glaring irregularities within the group’s highly diversified operations.

 

“The group is advocating transparency and issuing a stern warning that irrespective of the rank, none of its staff will be spared from the consequences of irregularities which can keep on cropping up in any big organisation,” the analyst said.

 

Another analyst concurred that it was a positive move by Sime Darby to reveal the losses rather than to cover up.

 

“I believe that some plantation analysts since last year have already sensed the irregularities, particularly the losses in the group’s downstream operations, attributing it to the unfeasible biodiesel operation.

 

“This losses were somewhat overlooked, given the good performance in the upstream plantation operation due to the higher CPO prices,” he added.

Although from a different industry, the nature of the losses in both cases are the same. It is all about wrong betting of the price of the oil. If Sime Darby can sacks its CFO for a losses of MYR 120 million, why can't MH do so now that their losses on fuel hedging for many quarters have reached almost or probably more than MYR 1 billion? I am not suggesting that the current CFO should be sacked, but MH, as a public listed company on Bursa Malaysia should shows that it protects its shareholders' fund.

 

Yep,, he like to do that,,, so its not their bad planning... but point fingers to others .... and derive to their decision... :finger:

Not sure what's the 'finger' is all about but I think Dato Tony has a basis to said so. MAHB now promised the new LCCT to be ready by March 2012 which is 7 months delay than originally planned. Then in June 2010, MAHB’s MD, Tan Sri Bashir said that the building size has increased from the one originally planned and the LCCT requires a revision in design to accommodate the larger building. No details of the revision were divulged as the tender process has (then) yet to be completed. The open tender exercise for the terminal was three months longer than expected. I hope you are aware that there are still many components of the new LCCT that have yet to be awarded (such as runway, taxiway, apron, draining the retention pond, relocation of a sewerage plant et. al). So, can you confidently said that the new LCCT will be ready by March 2012 and not 2013 as Dato Tony predicts? If the government didn't rejected the AirAsia/Sime Darby JV for the Labu airport, AirAsia would have its own airport by October 2011.

 

If you really don't know ... its best to keep it that way... and please try not to slander others,, as I said if you don't know its best to keep it that way.

I think of one doesn't know, he needs to find out. And I guess that is what SherM is doing.

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I am actually very curious on why MH takes this losses on fuel hedging matters like it is not a big deal at all as if it is all 'takdir'. And this quarter is not the first time losses on derivatives occurred. Each time it happened, the amount is nothing less than a 9 figures digit. But we don't hear any termination and sacking being done. The CFO is still the same person, and I am quite sure the person in charge of fuel hedging and yield management are still the same person too.

Yes, that is why many GLCs do not perform - because the executive officers are never held accountable for the companies' performance. AirAsia Group's fuel hedging policy is only to hedge the fuel requirements of their forward bookings. This means they are trying to match the costs to the sales revenue - a prudent way to hedge. This kind of policy will mean that any fuel price fluctuations will have no effect on the bottom line.

 

Yes ancillary income has gone up because AirAsia has shifted its focus on fares to other income. Thus we have seen substantial increases in their charges for checked-in luggage, meals, premium charges for call centre help, etc. They even slipped in a "convenience" fee for every sector of booking for those paying by credit cards.

 

Load factor has increased by 2% - but that is probably a result of their more aggressive flight cancellation and consolidation policies. You can see how much inconvenience this has caused with their pax in their Facebook page.

 

AirAsia needs to be careful about doing things that will affect pax loyalty. Although right now there seems to be a good cost/benefit ratio for pax to continue supporting them, it may change if they charge for ridiculous items like phone calls to the call centre (Tony Fernandes is thinking hard about this). I think calls can be chargeable if the pax wants to make changes. But if pax need to call as a result of AirAsia making changes, these should remain free. Even then, having to hold 1 or 2 hours means that pax have to pay their telcos for the cost of holding!

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