AirAsia reports big jump in profit, warns on surcharge

[flee 5]

KUALA LUMPUR, Feb 24 – Malaysia’s AirAsia Bhd reported an eight-fold increase in quarterly profit driven by growth in passenger volumes, and warned it may have to impose a fuel surcharge if oil prices stayed high.

 

The airline said it filled 82 per cent of the space available for passengers in the fourth quarter, up three percentage points from a year ago.

 

“Based on the current forward booking trend, the underlying passenger demand in the first and second quarters for the Malaysian, Thai and Indonesian operations remains positive,” AirAsia, Asia’s largest budget carrier by fleet size, said in a statement today.

 

Earlier this month, industry association IATA said the number of international air passengers from mainland China will rise by an average of 10.8 per cent per year through to 2014, making it the world’s fastest-growing market.

 

Net profit for October-December was at RM316.6 million compared with a profit of RM33.8 million a year ago.

 

Full-year net profit came in at RM1.1 billion against RM506 million a year ago, exceeding the RM822 million net profit forecast of 19 analysts tracked by Thomson Reuters I/B/E/S.

 

The budget carrier, which competes with Jetstar Asia Airways and Tiger Airways in the region, said it will take delivery of three A320 aircraft in the first quarter of the year, one of which will be operated in Thailand and two in Indonesia.

 

Nineteen out of 22 analysts tracked by Thomson Reuters I/B/E/S have either a “buy” or “strong buy” call on AirAsia shares, with a median target price of RM3.50 per share.

 

The stock has fallen by nearly 11 per cent since the start of the year compared with the two per cent fall in the benchmark stock index.

 

AirAsia shares fell more than five per cent today after oil prices hit a 2-1/2 high on concern the political tension in OPEC-member Libya could spread to other oil producers in the region. – Reuters

 

Bursa Malaysia Announcement here: http://announcements.bursamalaysia.com/EDMS/edmsweb.nsf/all/12AF4C9600B302A54825784100353465/$File/AirAsia%20Bursa%20Announcement%20-%20FY2010.pdf

[Mohd Azizul Ramli 2]

Wow, RM 1.1 billion NET PROFIT! Even MH never achieved such feat in its 65 years of existence. MH's best recorded net profit was RM 853 million achieved in its FY 2007.

[Mohd Suhaimi Fariz 2]

Wow, RM 1.1 billion NET PROFIT! Even MH never achieved such feat in its 65 years of existence. MH's best recorded net profit was RM 853 million achieved in its FY 2007.

 

I'd like to see the breakdown of their accounting in fine detail.

[Nuriman Ahmad 2]

great news there..congrats AK..

[JuliusWong 0]

Wow!!! RM1.1 billion!! Congrats AK on this amazing achievement!! The financial statement is very detailed. Notice that service fee charged to D7 has doubled last year.

 

Now, let us wait for MH yearly result. Surely, the 'spin-doctor' at MH can spin another RM1 billion right? lolx!!

[Mohd Azizul Ramli 2]

AK seems to have a high margin in its market/business segment:

 

Gross Margin is 1,850,486,000/3,992,722,000 = 46.35%

Net Margin is 1,066,877,000/3,992,722,000 = 26.72%

 

That's higher than the company I am currently working with LOL. Who says airline business especially LCC rides on thin margin?

 

Other Notes:

- Debts by FD and QZ reduced significantly during the financial year.

- Both FD and QZ recorded net profits of THB 2,845,614,000 and IDR 474,409,000 respectively.

- AK has a lot of cash - a staggering RM 1.5 billion in its bank accounts.

- Advance sales improved by 9%.

- AK achieved this record breaking net profit on top of a higher fuel average price of USD 91.80 per barrel in 2010 (vs. USD 67.70 in 2009). Fuel consumption up by 9% to 4,106,673 barrels costing the airline more than RM 1.2 billion. The fuel cost form 56.7% of AK's Cost of Sales.

- Average fuel cost in 2010: AK USD 91.80, FD USD 93.00, QZ USD 98.20.

- The breakdown of AK's RM 4 billion revenue is:

i. Ticket Sales - RM 2,844,500,000 (72.5%)

ii. Ancillary Income - RM 650,770,000 (16.5%)

iii. Other Operating Income - RM 440,380,000 (11%)

- The cost of Maintenance & Overhaul of AK's aircraft reduced by 15%, a prove of operating old aircrafts is a no no. This cost moves in tandem with the cost of aircraft leasing, which is reduced by 39% as more of the older B733s are returned to the lessors.

- The stronger Ringgit against the US Dollar resulted in AK saving RM 296,607,000 as unrealised forex gain.

- It seems that AK only paid a 3% of tax to the Malaysian government (instead of the standard 25% corporate tax rate). This is due to the reversal of an overprovision for tax in the prior year.

- Vietnam and the Philippines joint ventures are on with no changes in status since the last announcement.

[Walter Sim 1]

Thank MAR for the summary. I downloaded and had a look at the pdf and i did not understand any single thing at all!

[Mohd Azizul Ramli 2]

Well, it's a trade off. I am on the other hand could not understand the technical report which has those NOTAM, retard etc etc that you are very familiar with LOL.

[Mohd Suhaimi Fariz 2]

AK's financial reports includes FD & QZ? That explains it.

[Mohd Azizul Ramli 2]

AirAsia Thailand is a joint venture company owned 49% by AirAsia Berhad. As such it is accounted for using the equity method, as permitted by the Malaysian Accounting Standards Board FRS131, Interests in Joint Ventures.

 

AirAsia Indonesia is an associate company owned 49% by AirAsia Berhad. As such it is accounted for using the equity method, as permitted by the Malaysian Accounting Standards Board FRS128, Investments in Associates.

I see no reason for you to question that. The accounts were prepared using accounting standards used worldwide. It's really a VERY BASIC thing in accounting for a company with multiple subsidiaries and associate companies in multiple countries to consolidate its account at the group level. Please do not make yourself look rather unintelligent just because you are pro MH. Even MH accounts will include figures for FY, MASwings and any of its foreign own entity in the future.

 

Profits from FD and QZ is recorded in Other Operating Income - RM 440,380,000 together with other operating incomes which only consist of 11% from the total revenue.

 

It is as if you are questioning Petronas on why profits from their subsidiaries in Petronas Argentina S.A.; Petronas Australia Pty Ltd.; Petronas Thailand Co. Ltd.; Petronas Philippines Inc.; Petronas Cambodia Co. Ltd.; Petronas South Africa Pty Ltd.; Petronas India Holdings Company Pte Ltd.; Petronas China Company Ltd.; Petronas International Corp. Ltd.; Petronas Marketing Thailand Co. Ltd.; Myanmar Petronas Trading Co. Ltd.; Petronas Marketing (Netherlands) B.V. and Indianoil Petronas were included in its financial statements.

[KK Lee 5]

AK seems to have a high margin in its market/business segment:

 

Gross Margin is 1,850,486,000/3,992,722,000 = 46.35%

Net Margin is 1,066,877,000/3,992,722,000 = 26.72%

 

- The stronger Ringgit against the US Dollar resulted in AK saving RM 296,607,000 as unrealised forex gain.

 

 

Believe these are exceptional.

[flee 5]

I see no reason for you to question that. The accounts were prepared using accounting standards used worldwide. It's really a VERY BASIC thing in accounting for a company with multiple subsidiaries and associate companies in multiple countries to consolidate its account at the group level. Please do not make yourself look rather unintelligent just because you are pro MH. Even MH accounts will include figures for FY, MASwings and any of its foreign own entity in the future.

Yes, AK and MH are both public limited companies. As such all financial statements must comply with the same standards set by Bursa Malaysia. I see absolutely no reason to be sceptical about their numbers.

 

In the past, losses by the Thai and Indonesian units weighed down their results. Last year, both the Thai and Indonesian units turned around. That is why the results look remarkably good this time around!

 

I think that when the Philippine and Vietnam ventures get off the ground, it will be tough again. But with IPOs for the Thai and Indonesian as well as AirAsia X coming, the 2011 accounts will make highly interesting reading.

[Mohd Suhaimi Fariz 2]

I see no reason for you to question that. The accounts were prepared using accounting standards used worldwide. It's really a VERY BASIC thing in accounting for a company with multiple subsidiaries and associate companies in multiple countries to consolidate its account at the group level. Please do not make yourself look rather unintelligent just because you are pro MH. Even MH accounts will include figures for FY, MASwings and any of its foreign own entity in the future.

 

Profits from FD and QZ is recorded in Other Operating Income - RM 440,380,000 together with other operating incomes which only consist of 11% from the total revenue.

 

It is as if you are questioning Petronas on why profits from their subsidiaries in Petronas Argentina S.A.; Petronas Australia Pty Ltd.; Petronas Thailand Co. Ltd.; Petronas Philippines Inc.; Petronas Cambodia Co. Ltd.; Petronas South Africa Pty Ltd.; Petronas India Holdings Company Pte Ltd.; Petronas China Company Ltd.; Petronas International Corp. Ltd.; Petronas Marketing Thailand Co. Ltd.; Myanmar Petronas Trading Co. Ltd.; Petronas Marketing (Netherlands) B.V. and Indianoil Petronas were included in its financial statements.

 

Hey, no need to be defensive. I'm just stating that AK's results are as a whole, not just AK's operation in Malaysia. Why the need to label me as pro-this and pro that. Can't we just have a civilized discussion without name-calling?

 

And yes, when it comes to accounts I'm unintelligent. Excuse me for not studying accounts in university.

[Mohd Azizul Ramli 2]

It's not defensive. I have nothing to defense. I am not working with AK nor the one who prepared the accounts.

 

But first of all, you said

 

I'd like to see the breakdown of their accounting in fine detail.

even the link to the details are already provided in the thread starter. Then you said

 

AK's financial reports includes FD & QZ? That explains it.

after I posted a summary of the accounts in reply #6. The tone of that statement of yours is very cynical as if AK cheated or manipulated their numbers just to show a high profit. Then I wonder, if you said

 

I'd like to see the breakdown of their accounting in fine detail.

only to admit later on that you are

 

And yes, when it comes to accounts I'm unintelligent. Excuse me for not studying accounts in university.

then I am really curious on why you wanted to see the breakdown of their accounting in fine detail quote and unquote in the first place?

 

The thing with pro this and that is because from my observation, some members here can't seem to see/judge/discuss thing objectively and in civilized manner, without being bias to MH or AK.

[Mohd Suhaimi Fariz 2]

Yeah, it was my fault. Didn't see fully the PDF where they stated FD & QZ.

 

Which is why I never do any direct investments in the stock market.

[Mohd Azizul Ramli 2]

But it has always been like that since like forever. AK includes numbers for FD and QZ all the time in every quarterly submissions to Bursa Malaysia without exception. It is not that they decided to include FD and QZ numbers in 2010's full year account out of a sudden.

[flee 5]

Hey, no need to be defensive. I'm just stating that AK's results are as a whole, not just AK's operation in Malaysia. Why the need to label me as pro-this and pro that. Can't we just have a civilized discussion without name-calling?

 

And yes, when it comes to accounts I'm unintelligent. Excuse me for not studying accounts in university.

OT:

Whilst I respect that everyone should be able to express his or her opinion, it would be better if you did it after you fully understood the facts. Blasting your mouth off without any basis makes anything you say rather feeble. Objective thinking and reasoning will garner respect.

 

 

 

Back on topic - it looks like investors are impressed with the full year results. At lunchtime today, AirAsia shares were up 14 sen to RM 2.49 (5.96%) on Bursa Malaysia.

 

Here is some Bloomberg news on their IPOs:

 

AirAsia may raise US$400m from IPOs

AirAsia Bhd, Southeast Asia’s biggest budget carrier, may raise as much as US$400 million from separate listings of its Indonesian and Thai units to help pay for expansion.

 

The company expects to raise US$150 million to US$200 million in each offering, both of which will likely happen in the fourth quarter, Chief Executive Officer Datuk Seri Tony Fernandes said in a Bloomberg TV interview today.

 

Bankers for the Indonesian share sale may be announced as soon as today, he said.

 

The airline jumped the most in three months in Kuala Lumpur trading after yesterday reporting a ninefold jump in profit and saying it may begin paying dividends. The company, based in Selangor, Malaysia, plans to sell shares in overseas units as it seeks new planes, possibly including 175 of Airbus SAS’s planned A320neo.

 

The result was “fantastic,” Maybank Investment Bank Bhd. analyst Wong Chew Hann wrote in a report today, maintaining his “buy” rating and RM3.36 share forecast. “2010 was the best ever in AirAsia’s history.”

 

The airline jumped as much as 6.4 per cent, the biggest intraday gain since Nov 26, to RM2.50. It was at RM2.49 as of 12.04 p.m.

 

The company has surged 73 per cent over the past year, overtaking Malaysian Airline System Bhd. as the nation’s biggest airline by market value. - Bloomberg

[Mohd Azizul Ramli 2]

Wong Chew Hann of Maybank Investment was quoted in that article. Here is the link to his report issued out today. http://research.maybank-ib.com/download.php?did=553&mid=

 

Some interesting points from the report:

 

RM979m recurring net profit (+160% YoY) with industry leading margins of 19.3% validates AirAsia’s stature as a global LCC heavyweight – third behind Southwest and Ryanair.

 

AirAsia’s hedged 21% of its 2011 consumption up to April 2011 at a price of USD92.31 (WTI crude)

 

Indonesia’s core net profit of RM1.8m was lower than expected. Yield growth and load factor were negatively impacted by intense competition. The Indonesian aviation sector is booming; it is the best performing country in the world after China, with robust traffic and yield advances.

 

The charts below show that Thailand repaid RM266m and Indonesia repaid RM181m in 2010. We think the risk of auditors writing off the associates has diminished to null. Should this momentum continue, we believe Thailand will be able to repay fully by 2011 and Indonesia by 2012.

 

Management affirms the listing process is ongoing, Thailand may list between 3Q and 4Q, followed by Indonesia at the end of 4Q. No IPO size was mentioned; we estimate a range of USD150-250m to be raised by each associate.

 

Bandung airport is undergoing runway lengthening, and should be ready by June 2011. This will enable AirAsia to use its Airbus A320 (currently not able to due to runway constraints). Bandung is a very profitable route for AirAsia and they have a commanding market share. This will enable AirAsia to add new markets.

 

AirAsia is resisting the order to move to Terminal 1 of Kota Kinabalu airport citing higher PSC and no incentive to do so.

Our opinion: This is an old, unresolved problem. AirAsia will do whatever it takes to lower its costs, and therefore it will resist the order to move to T1 as it will incur higher costs. We hope the authorities concur with AirAsia as the present LCCT at Kota Kinabalu is a proper and comfortable facility.

 

When Thai and Indonesia associates are public listed, all the leased aircraft from the parent company will be transferred to the respective companies, and AirAsia Berhad will no longer carry the balance sheet burden.

The last point is very interesting though. It is as if AK will sell the planes to FD and QZ but at what rate? Book value? By doing so as well, AK will lose all the aircraft leasing incomes it is currently enjoying. AK received MYR 63,537,000 from FD and MYR 47,554,000 from QZ as lease rental income on aircrafts in 2010.

[suadrif 0]

Stellar performance. Just imagine if they are allow to fly where ever they want, maybe they will be twice as big as today.

[flee 5]

AK will sell the planes to FD and QZ but at what rate? Book value? By doing so as well, AK will lose all the aircraft leasing incomes it is currently enjoying. AK received MYR 63,537,000 from FD and MYR 47,554,000 from QZ as lease rental income on aircrafts in 2010.

Well it will make the AK balance sheet better because Thai and Indonesia AirAsia will now own their own planes and finance them themselves. Although AK receives lease rentals (P&L), they also have to repay loans (P&L) and carry the assets (aircraft) and liabilities (loans, master leases) on their Balance Sheet. Since they only own 49% of these units, it is quite a heavy burden to take on the financial risks for an associate company, isn't it? I think that, on balance, it is better to let Thai and Indonesia carry their own assets and liabilities.

 

I am sure that the aircraft valuations will be at current market values. It is not difficult to assess aircraft values. So it should not be a big problem.

 

I think AK will still be getting MRO revenue from them - so not all income is lost!

 

Stellar performance. Just imagine if they are allow to fly where ever they want, maybe they will be twice as big as today.

Its not so simple - LCCT capacity is the limiting factor here.

 

That is why AK currently is rationalising its routes so that only highly profitable routes will remain. When the LCCT capacity is constrained, there is no point operating low profit or loss making routes. It will be a waste of resources!

 

When KLIA2 is ready, AK will then be able to fly full speed ahead again.

[Mohd Azizul Ramli 2]

Since they only own 49% of these units, it is quite a heavy burden to take on the financial risks for an associate company, isn't it? I think that, on balance, it is better to let Thai and Indonesia carry their own assets and liabilities.

 

I am sure that the aircraft valuations will be at current market values. It is not difficult to assess aircraft values. So it should not be a big problem.

 

I think AK will still be getting MRO revenue from them - so not all income is lost!

I agree. Then we could expect quite a substantial amount of income to be realised as gain on asset disposal in 2011 and 2012 accounts. FD has 19 aircrafts as at 31 December 2010 (I assume all 19 are A320s) and QZ has 18 aircrafts (with a few B733s in the fleet). But I believe the transfer will be done gradually as FD and QZ might not be able to take on all the aircrafts in one go. Just a note, a brand new A320 carries a catalog price of USD 85 million per unit (MYR 260 million).

[flee 5]

From The Star: http://biz.thestar.com.my/news/story.asp?file=/2011/2/25/business/8136557&sec=business

 

AirAsia revenue breaches RM1bil mark

 

Q4 profit up 8-fold on higher demand, yields

 

KUALA LUMPUR: AirAsia Bhd's net profit jumped more than eight-fold to RM316.5mil in the fourth quarter ended Dec 31, 2010 against RM33.9mil previously while its full-year earnings hit the RM1bil mark driven by higher passenger numbers and stronger yields.

 

Revenue for the quarter rose 33% to RM1.18bil from RM894mil a year ago while earnings per share jumped to 11.50 sen versus 1.50 previously.

 

The budget carrier's core operating profit for the period was RM332.8mil, a 147% increase over RM134.7mil posted a year ago.

 

Its earnings before interest, tax, depreciation and amortisation margin improved to 49.3% from 43.3% previously.

 

In a teleconference yesterday, group CEO Datuk Seri Tony Fernandes said AirAsia was in the best position financially that it has ever been in providing foundation for further expansion and growth in 2011.

 

He said AirAsia would continue its focus on lowering costs, improving returns and expanding its network.

 

Based on the current forward booking trend, Fernandes said the underlying passenger demand in the first and second quarters of this year for Malaysia, Thailand and Indonesia operations remained positive.

 

However, he said it must be seen in the context of the recent sharp rises in the price of oil and aviation fuel which had resulted from events in the Middle East.

 

“AirAsia will continue to monitor oil price movements, and the introduction of a fuel surcharge cannot be discounted if the current price is sustained or rises further,” Fernandes said.

 

For the full year, AirAsia's profit more than doubled to RM1.06bil, or 38.60 sen per share from RM506.3mil, or 20.60 sen per share despite average fuel prices surging 35% year-on-year to US$92 a barrel in 2010. Revenue for the period rose to RM3.99bil from RM3.2bil previously.

 

The revenue growth was supported by 13% growth in passenger volumes and average fare that was 5% higher at RM177 as compared to RM168 achieved in 2009. Meanwhile, its seat load factor was three percentage points higher at 78% compared to 75% in 2009.

 

The AirAsia group combining its Malaysian, Indonesian and Thai operations carried 25.7 million passengers, up 13.1% from the 22.7 million people it carried in 2009.

 

“What a year we've had. Not only did we achieve record profits, but also breached the billion-ringgit mark in net profit. With strong cash balances of RM1.5bil, our gearing levels decreased to 1.75 times compared with 2.57 times a year ago,” Fernandes said.

 

He said the increased contribution from ancillary income to the company's bottom line matched its passenger growth. “Ancillary has been a tremendous revenue stream for us. It's up in all three of our operations: Malaysia RM49 per pax; Thai AirAsia at 369 bahts per pax and Indonesian AirAsia at 155,089 rupiah per pax.”

 

“There's still a lot of potential in ancillary and we're constantly looking to increase the numbers,” he said, adding that its ancillary income had been a “great defend” for high oil prices.

 

He said every RM1 per pax spent provides about US$1 per barrel of buffer.

 

Fernandes said AirAsia might consider re-introducing the fuel surcharge which it removed in November 2008 if oil prices were to remain high.

 

“I do not want to jump the gun. Let the situation stabilise first and we will evaluate the situation,” he said when asked on the threshold of oil prices whereby AirAsia would introduce the fuel surcharge.

 

AirAsia has hedged up to 21% of its oil needs for the first half this year at an average of US$92.31 a barrel.

 

South-East Asia's largest low-cost airline by fleet size will take delivery of three A320 planes in the first quarter of this year, one of the aircraft will operate in Thailand and two in Indonesia.

 

The new aircraft would be used to replace the B737s and would provide additional capacity across the network. Six new routes are being planned across the network in the first quarter in conjunction with additional frequencies on existing routes.

 

“We have also recently announced our fleet delivery plans for 2012 whereby the group will take delivery of 14 aircraft from the proposed 24 as we adapt to changing circumstances,” Fernandes said, adding that the financing for eight aircraft to be delivered in 2011 had been secured.

 

At the end of December, AirAsia had 53 aircraft in its fleet, up from 48 in 2009.

 

Meanwhile, AirAsia is also planning initial public offerings (IPOs) for its Indonesian and Thai affiliates in both countries.

 

The IPOs, Fernandes said, were likely to go ahead in Indonesia and Thailand by the fourth quarter of this year, subject to market conditions.

 

He said the offerings were intended “to build a war chest” for future expansion, including new aircraft to raise profitability and expand operations in both markets.

 

The Indonesian IPO might aim to raise between US$150mil and US$200mil, he added.

 

He also said that it was close to receiving regulatory approval to start the Philippines AirAsia.

 

“AirAsia Philippines should launch its inaugural flights in the second half of the year. We believe there is enormous potential in the Philippines,” he said.

 

On its dividend, Fernandes said the board would likely make a decision on its first dividend payout in the next two to three weeks.

 

He said the airline had received strong demand from institutional investors to start paying dividends.

[Mohd Azizul Ramli 2]

The Star's headline undermines AK's true performance. It should read "AirAsia revenue breaches RM4bil mark" or more accurately, "AirAsia net profit breaches RM1bil mark".

[Sri Ramani K. 0]

AirAsia hits record profit, not looking at fuel surcharge

Written by Yong Min Wei

Friday, 25 February 2011 15:20

 

KUALA LUMPUR: AirAsia Bhd, which posted a record profit for the financial year ended Dec 31, 2010 is not looking at imposing fuel surcharge despite surging crude oil prices.

 

The fastest growing low-cost carrier (LCC) which recorded an impressive 835% jump in its 4QFY10 net profit to RM316.55 million from RM33.87 million a year ago, is also looking at listing both its Indonesian and Thailand associates by year-end.

 

On the possibility of the LCC fuel surcharge, its group CEO Datuk Seri Tony Fernandes told analysts via conference call yesterday that the low-cost airline would continue to monitor oil price movements and that they still had the capacity not to introduce fuel surcharge.

 

“It is important to note that we have no fuel surcharge at all for two years now. If we need to, we can reintroduce fuel surcharge and are ready to do it within 24 hours. But we have better fuel management and will monitor the situation... we don’t want to impose fuel surcharge and remove it weeks later,” he said.

 

He said that AirAsia is able to handle the increase in crude oil prices without imposing a surcharge by increasing revenue, better route management and increasing ancillary income.

 

On the strong results posted by AirAsia, the company stated in a filing to Bursa Malaysia that 4Q profit was recorded on revenue growth of 33% to RM1.18 billion from RM894.05 million a year ago. The higher revenue growth was supported by 11% growth in passenger volumes and average fare that was 7% higher at RM188 compared to RM176 achieved in 4QFY09.

 

“Seat load factor was three percentage points (ppt) higher at 82% compared to 79% in the same period last year,” the low-cost airline said in notes accompanying its financial results.

 

AirAsia posted basic earnings per share of 11.5 sen in 4QFY10 against 1.4 sen a year ago while net assets per share stood at RM1.31 as at Dec 31.

 

For FY10 ended Dec 31, the group’s net profit surged 111% to RM1.06 billion from RM506.26 million a year ago while revenue rose 26% to RM3.99 billion from RM3.17 billion.

 

Basic earnings per share for FY10 climbed to 38.6 sen from 20.6 sen previously.

 

Commenting on its strong results, Fernandes said: “What a year we’ve had. Not only did we achieve record profits, but also breached the billion-ringgit mark in net profit. With strong cash balances of RM1.5 billion, our gearing levels decreased to 1.75 times as compared to 2.57 times a year ago.”

 

He said that the growth in ancillary income, in pace with the rising passenger loads was a strong affirmation of the company’s strategy of looking beyond just air fares to strengthen revenues.

 

“There’s still a lot of potential in ancillary and we’re constantly looking to increase the numbers,” he pointed out.

 

Based on the current forward booking trend, the company said the underlying passenger demand in the first and second quarters for the Malaysian, Thai and Indonesian operations remained positive.

 

“Load factors achieved in the month of January were ahead of the prior year for all three carriers, and there are continued improvements in yield, compared to the prior year,” it stressed.

 

AirAsia said in Thailand, 1Q was expected to be strong, being the peak season for tourist arrivals when demand for travel was high. Thailand is expected to deliver a strong first quarter with high load factors.

 

As for Indonesia, it said the next two quarters would remain strong with more international destinations planned from the Medan hub in 1Q.

 

It added the abolition of the travel tax for Indonesians flying abroad, which took effect on Jan 1, 2011, had boosted international sectors and additional frequency is planned for 2Q to cope with demand.

 

AirAsia also said it would take delivery of three A320 aircraft in 1Q this year, one of which will be operated in Thailand and two in Indonesia. The new aircraft would replace the B737’s and will provide additional capacity across the network.

 

Shares in AirAsia yesterday slipped 13 sen to RM2.35 with 20.4 million units traded.

 

 

This article appeared in The Edge Financial Daily, February 25, 2011.

 

I find the previous articles misleading as they keep warning that reintroduction of fuel surcharge looks almost viable should oil prices remain as what it is now or move up higher wherelse in this article from The Edge, Tony kept reassuring that there are better ways to tackle the fuel surcharge issue. I believe he has already taken the first step which you can read >HERE.

[flee 5]

I find the previous articles misleading as they keep warning that reintroduction of fuel surcharge looks almost viable should oil prices remain as what it is now or move up higher wherelse in this article from The Edge, Tony kept reassuring that there are better ways to tackle the fuel surcharge issue. I believe he has already taken the first step which you can read >HERE.

I think that too much focus is placed on this fuel surcharge issue. It is something that legacy airlines introduced to cover their inefficiencies. AirAsia is a tight ship and is controlling its costs very well. It is no real need to impose fuel surcharges and TF is right to say that there are better ways to manage the volatile fuel prices.

 

In the Bursa Malaysia Q4 announcement, AirAsia has stated that it does not have any outstanding fuel hedging positions. So it is buying all its fuel at spot prices now.