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2019 Q4 Financial Results for Airasia Group/Airasia X

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AirAsia slips into red ink in FY19 on absence of RM1.1b gains, impacted by accounting standards 

KUALA LUMPUR (Feb 27): AirAsia Group Bhd, Asia's largest low-cost carrier by passengers carried, fell into the red in the financial year ended Dec 31, 2019 (FY19), mainly due to the absence of a RM1.1 billion gain in 2018.

It posted a net loss of RM303.72 million in FY19 compared with a net profit of RM1.97 billion in the previous year.

The carrier was also impacted by the recognition of one-off costs, which includes consultant costs for sales and leaseback transactions of RM25 million, tax provision and payment for a subsidiary of RM49 million, discounting of a long term receivable of RM40 million and share of losses in AirAsia India of RM280 million including recognition of prior year losses, it added.

In a statement today, AirAsia also blamed the weaker performance on accounting treatment of its restructured aircraft ownership, moving from owning to leasing aircraft, despite recording similar cash outflow in either financing method.

"MFRS137 accounting treatment has resulted in a 43% increase in maintenance and overhaul costs, while MFRS16 adoption negatively impacted the results by RM131 million in FY19," it said.

Revenue for the year, however, was up 17% to RM12.45 billion from RM10.64 billion in the previous year.

The carrier continued to post positive operating cash flow (post operating lease) during the year amounting to RM1.6 billion. 

Full report: https://www.theedgemarkets.com/article/airasia-slips-red-ink-fy19-absence-rm11b-gains-impacted-accounting-standards 

Airasia Group Press Release

Airasia Group Investors' Presentation

Airasia Group Bursa Malaysia filing

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Higher depreciation, finance costs drag AirAsia X deeper into the red in 4Q, FY19 

KUALA LUMPUR (Feb 27): Long-haul, low-cost airline AirAsia X Bhd (AAX) saw its four-quarter net loss widen 8.8% to RM95.81 million from RM88.05 million, on higher depreciation and finance costs with the adoption of MFRS 16 Lease which came into force on Jan 1, 2019.

AAX's filing with Bursa Malaysia today showed that depreciation costs increased by 10 times to RM241.26 million in the three months ended Dec 31, 2019 (4QFY19) from RM24.14 million a year ago, while finance costs more than doubled to RM100.37 million from RM47.96 million in 4QFY18.

As a result, AAX's loss per share was higher at 2.3 sen for 4QFY19 compared with 2.1 sen for 4QFY18.

This was despite revenue for the quarter rising 3.6% to RM1.2 billion from RM1.15 billion a year ago. Passengers carried recorded in 4QFY19 increased 8% year-on-year to 1.61 million, while passenger load factor stood at 81%. 

Full report: https://www.theedgemarkets.com/article/airasia-x-posts-bigger-fy19-net-loss-rm489m-higher-share-losses-thai-associate

Airasia X Press Release

Airasia X Investors' Presentation

Airasia X Bursa Malaysia filing

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In their latest 2019 Q4 Financial Report, the Management has taken several decisions to save the airline due to the challenges caused by the CoVid-19 outbreak.

Some of the measures:

- Use of A321 on routes of 4-6 hours flying time
- Return 5 aircraft to lessors earlier than planned
- Sell 2 aircraft
- renegotiate remaining leases
- Postpone new A330Neo deliveries
- renegotiate all contracts with airports and other suppliers
- terminate unprofitable routes: Tianjin, Lanzhou, Jaipur, + more to come

It looks like 2020 is a crucial year for Airasia X - they will have to work very hard to stay afloat.

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Heard they can't even keep up the lease payments due for the current a330s and are asking for a deferment payment.

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I think it is time to close Indonesia Airasia X and to return the two leased planes to Aercap. There is no future there, especially now that Citilink has taken delivery of A330Neos.

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33 minutes ago, KK Lee said:

Only possibility for D7 to be sustainable profitable is to use A321 on large proportion of routes.

Although D7 has ordered the A321 XLR, I suspect its requirement is rather more urgent and it will not be able to wait till the 2023 delivery date. I suspect that it will lease the aircraft from Airasia's order book as the standard 236 seat A321 Neo can do many routes that take 4-6 hours. AK is also looking to postpone their deliveries - so won't mind allowing D7 to take some of their planes.

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I'm guessing their current 'Unlimited Pass' offer (RM499 exclusive taxes and "fees applicable") is a fund raising attempt to alleviate cash flow crisis :) 

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1 hour ago, BC Tam said:

I'm guessing their current 'Unlimited Pass' offer (RM499 exclusive taxes and "fees applicable") is a fund raising attempt to alleviate cash flow crisis :) 

I concur.

I wonder if the airline will still be around in 12 months' time for you to use this pass? It may also cancel routes - so this unlimited travel is going to be only on limited routes!

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limited route, limited seats, and to spice things up, maybe only valid for ex KUL flight, meaning you gotta pay full fare on return (if the assumption on ex KUL is correct).

i wonder letting them to fly some high load route will able to help their numbers? like KUL-DPS, KUL-BKI, KUL-PEN, the (profit sharing) operating model of KUL-SIN

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1 hour ago, Kenny Sing said:

limited route, limited seats, and to spice things up, maybe only valid for ex KUL flight, meaning you gotta pay full fare on return (if the assumption on ex KUL is correct).

i wonder letting them to fly some high load route will able to help their numbers? like KUL-DPS, KUL-BKI, KUL-PEN, the (profit sharing) operating model of KUL-SIN

It is all D7 and XJ flights except KUL-SIN, KUL-DPS and KUL-JED.

But it is also subject to availability. Plus there are also blackout dates/embargo periods. So it is not as unlimited as you think. I guess if you fly 2 sectors, you should be about break even. If u manage to fly more than 2 sectors, you are in profit. But so are Airasia X cos they can collect luggage fees, seat reservation fees, fnb, etc.

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Considering that now AAX stock price is at about 9 sen (!!!), I think it is ripe for Tony/Kamaruddin/Tune to privatize it again and consolidate operations under one operating company (which I think was always the case anyway).

Talking about stock price, AirAsia closed RM1.01 last Friday but today it is at RM1.04. Crazy times.

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that's why. anyway, like you said, the unlimited flypass could be a fund raising effort to secure some instant money and bolster themselve for lower passenger volume due to COVID-19. WIn win situation actually, passenger flies unlimited time without paying the fare and other additional charges are collected by airliner. wasn't too bad at all.

But seriously, i think they should consider to deploy their A333 like the KUL-SIN model to routes like KUL-BKI, KUL-DPS, KUL-PEN and/or any routes that they have high pax loads

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20 hours ago, Kenny Sing said:

that's why. anyway, like you said, the unlimited flypass could be a fund raising effort to secure some instant money and bolster themselve for lower passenger volume due to COVID-19. WIn win situation actually, passenger flies unlimited time without paying the fare and other additional charges are collected by airliner. wasn't too bad at all.

But seriously, i think they should consider to deploy their A333 like the KUL-SIN model to routes like KUL-BKI, KUL-DPS, KUL-PEN and/or any routes that they have high pax loads

Issues are already cropping up when people try to redeem! Typical Airasia...

KUL-DPS already running for a long time already but I doubt that they will do KUL-BKI or KUL-PEN on a regular basis. AK has already added capacity using the A321Neo for KUL-SIN, KUL-KCH and KUL-BKI - so A330 won't really be needed.

 

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you got a point here.... anyway let their flight planner do the calculation, they surely know how to play around with the numbers especially MAHB will be lowering the landing and parking charges per the stimulus package.

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AirAsia X is in dire situation now. Insider's news they are unable to make lease payment and commitment for next few months due to credit crunch. The recent free seat sales was abysmal. Quickly returning some aircraft provided if the lessors agree to let them. Also asking Airbus to delay A339neo delivery by two years. Next up is UPL for crew which might be implemented this month. 

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Quote

The management of the Company is taking action to defer all payments to major creditors, to maintain cash flow and continuity of operations.

That was the line in the Q4 2019 report that got alarm bells ringing for me. They are under a severe cash flow crisis and that is why I am doubtful that they will be around to honour their RM499 "unlimited" pass commitments. With Covid-19, Airbus corruption investigation and a government coup in progress, this is the perfect storm that will cause D7 to crash. Hopefully, management can come up with something - if not, staff will suffer the most!

 

Edited by flee

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9 hours ago, flee said:

That was the line in the Q4 2019 report that got alarm bells ringing for me. They are under a severe cash flow crisis and that is why I am doubtful that they will be around to honour their RM499 "unlimited" pass commitments. With Covid-19, Airbus corruption investigation and a government coup in progress, this is the perfect storm that will cause D7 to crash. Hopefully, management can come up with something - if not, staff will suffer the most!

 

Believe D7 need to cut their capacity drastically soon else may not survive. Unlike regional LCC that could benefit from short turn around time, etc;  except squeezed in more seats (e.g 9/per row), long range LCC has little cost benefit over legacy carrier. Few regular/business travellers willing to take ungodly hour departure/arrival, uncomfortable seat, lack of entertainment, etc; hence, outside peak seasonal period, A333 load is below break even.

 

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Well plans are already in place to cut capacity - they are returning 5 aircraft to lessors early. And they are also planning to raise cash by selling 2 aircraft. So taking 7 planes out will reduce the fleet to 15. Together with the A339 delivery deferrals, they may be able to increase aircraft utilisation to further reduce costs.

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52 minutes ago, flee said:

This report has a little bit more detail than what the press releases put out:

AirAsia X defers A330neo deliveries, plans to use A321neo

To use A321 to match demand is long overdue and may be too late.

If XJ couldn't break even in tourists popular Thailand, doubt the long range LCC/D7/XJ business model is sustainable.

Airlines business is like hospitality businesses, high profile, glamorous to look at, many wanted to join but few are profitable.

Edited by KK Lee

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30 minutes ago, KK Lee said:

To use A321 to match demand is long overdue and may be too late.

If XJ couldn't break even in tourists popular Thailand, doubt the long range LCC/D7/XJ business model is sustainable.

Airlines business is like hospitality businesses, high profile, glamorous to look at, many wanted to join but few are profitable.

I think XJ is doing better now that they have some scale. 

Another problem is that they are competing against state owned airlines with heavy funds injections from their governments. So its a question of who has deeper pockets. However, in recent years, both Thai and Malaysian govts are more reluctant to fund the losses of their flag carriers. But is that too late?

Airlines can do well if the whole industry work together as partners. 

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14 hours ago, flee said:

I think XJ is doing better now that they have some scale. 

Another problem is that they are competing against state owned airlines with heavy funds injections from their governments. So its a question of who has deeper pockets. However, in recent years, both Thai and Malaysian govts are more reluctant to fund the losses of their flag carriers. But is that too late?

Airlines can do well if the whole industry work together as partners. 

Other state airlines around the world have their respective lcc based airline. Take scoot and jetstar long haul operations for example, they never profit long term they just exist as like a mercy company cause many locals cant afford qf and sq full service tickets. Airasia on the other hand has no one to depend on and forced to do many aux based businesses to feed subsidiaries money pitt. Lion air has deep locket lion group to alleavate any financial turndown and they have yet to open scheduled 9 hour flights. 

Gulf carriers preaching for open skies free market but i think it doesnt work cause there is no level playing field for anyone to make it fair for anyone. Some rich country will just cash in a company and invade the market share any day. 

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AirAsia offloaded two A320-214

MSN2633 9M-AFB became LaudaMotion OE-LMR

Last flight KCH-KUL AK5237 20:09-21:44 4th February 2020

MSN2656 9M-AFC became LaudaMotion OE-LMT

Last flight BKI-KUL AK9147 18:34-20:50 7th February 2020

Edited by JuliusWong

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