AirAsia's profits hit by financing costs

[flee 5]

Malaysia's AirAsia Bhd (AIRA.KL), Southeast Asia's biggest budget airline by passenger traffic, posted a 39.23 percent fall in first-quarter profits on Wednesday, hurt mainly by higher finance costs and a foreign exchange loss on borrowings.

AirAsia earned 104.79 million ringgit ($34.72 million) in the three months ended March, down from 172.44 million ringgit in the same period last year, although the operating profit was up 6 percent, according to a stock exchange filing.

Earlier this month AirAsia said its passenger numbers were up 19 percent in the quarter at some 9.8 million.

More: http://uk.reuters.com/article/2013/05/22/us-malaysia-airasia-earnings-idUKBRE94L0GL20130522?type=companyNews

Bursa Malaysia filing: http://announcements.bursamalaysia.com/EDMS/edmsweb.nsf/all/6F64F1E07572303A48257B73003B3C9C/$File/AirAsia%20Bursa%20Announcement%20-%20Q1%202013%20-%20Final.pdf

[flee 5]

AirAsia Q1 net profit down 39%

 

PETALING JAYA (May 23, 2013): AirAsia Bhd, the largest low-cost carrier in Asia, saw its net operating profit for the first quarter ended March 31, 2013 (Q1) grow 3% to RM168.4 million from RM163.5 million a year ago, on higher passenger numbers and increased ancillary income per passenger, average fare and capacity.

The number of passengers carried in Q1 grew 7% to 5.17 million, while ancillary income increased to RM42 per passenger from RM40 a year ago. Its Q1 capacity also increased as the number of aircraft operating in Malaysia rose to 66.

However, net profit for Q1 was lower by 39% to RM104.8 million from RM172.4 million a year ago, due to a RM33 million loss in foreign exchange on borrowings for the January-March 2013 period compared with a gain of RM88.1 million a year ago.

Revenue jumped 8% to RM1.3 billion from RM1.2 billion.

"I am happy to see that our initiatives to further reduce costs are beginning to materialise with higher staff productivity leading to a reduction in staff cost. Measured by cost per available seat per km (CASK), cask ex-fuel was down by an impressive 5% at 6.83 sen compared with 7.18 sen the same period last year. But due to the increase in the average fuel price, the overall cask stood at 13.62 sen, which is flat year-on-year," said AirAsia Malaysia CEO Aireen Omar in a statement yesterday.

The airline's revenue for Q1, measured in terms of revenue per available seat per km (RASK), remained at the same level of 16.89 sen.

This was achieved on a 2% increase in average fare in Q1 to RM180 from RM177 a year ago, which offset the 1% decline in passenger load factor to 79%.

As at March 31, 2013, AirAsia's cash reserves stood at RM2.17 billion, with a net gearing level of 1.38 times.

Aireen said this year, the airline will take delivery of six aircraft, which will mainly cater to the increase in frequencies on its existing and high load routes.

"We were initially looking at adding 10 aircraft this year, but as a group we decided to make room for the associates to grow, primarily Thai AirAsia and the upcoming AirAsia India.

"In addition, with the recent announcement of KLIA2 being delayed, we are certain the current low-cost carrier terminal's capacity will be a constraint,"she added.

Airport operator Malaysia Airports Holdings Bhd had earlier this month said the opening of KLIA2, scheduled for June 28, will be delayed after taking into account several key quality and safety issues.

Meanwhile, AirAsia recognised a net loss of RM1.4 million from its share of profits from associates, mainly due to the recognition of RM33.2 million in losses from its 49% stake in AirAsia Japan.

Its most profitable associate was Thai AirAsia, contributing some RM31.7 million, while Asian Aviation Centre of Excellence Sdn Bhd contributed RM1.9 million.

AirAsia recognised RM4.2 million in losses from AAE Travel Pte Ltd, a joint venture company between AirAsia and Expedia Inc.

The airline also said it will only recognise profits in Indonesia AirAsia, Think Big Digital Sdn Bhd – a joint venture between AirAsia and Tune Money International Sdn Bhd, and AirAsia Philippines when its losses of RM163 million, RM20.7 million and RM37.7 million respectively, have been reversed.

In a separate announcement, AirAsia said its 40%-owned AirAsia Inc in the Philippines has completed its acquisition of 49% of the voting rights and 85% of the economic interest in Zest Airways, Inc. This also includes the acquisition of 100% of the shareholding in Asiawide Airways, Inc.

Source: The Sun

[BC Tam 2]

 

The airline also said it will only recognise profits in Indonesia AirAsia, Think Big Digital Sdn Bhd – a joint venture between AirAsia and Tune Money International Sdn Bhd, and AirAsia Philippines when its losses of RM163 million, RM20.7 million and RM37.7 million respectively, have been reversed.

Creative accounting ?

[flee 5]

 

Creative accounting ?

Far from it - this is the application of the "prudence concept" in accountancy.

 

Remember that all these companies lost money during their startup phase. So the Airasia Berhad books have to take losses for each of those opening years. Until all the accumulated losses are recovered in future, they cannot show the profits as profits.

 

So far, only Thai Airasia has erased their accumulated losses and that is why Airasia can now take the profits into account.

[Gavin Andrew David 6]

Asian Aviation Centre of Excellence Sdn Bhd contributed RM1.9 million. - Their training center is making a decent amount of money!

[flee 5]

I believe the AA board are trying to make profit centres out of their various units. So, the training activities are now well and truly monetised.

 

It appears like Malaysia Airlines is experiencing similar forex losses and high oil price problems as the Airasia Group as they reported higher Q1 2013 losses yesterday.