2014 Q2 Financial Results for Malaysia Airlines & Air Asia Group

[flee 5]

 

Malaysia Airlines delays Q2 earnings announcement to Aug 28

 

Aug 19 (Reuters) - Malaysia Airlines (MAS) , the loss-making carrier reeling from two separate aircraft disasters this year, has postponed publication of second-quarter earnings from Wednesday until Aug. 28, a company official told Reuters on Tuesday.

The official didn't disclose a reason for the delay. MAS will confirm the new date for disclosure of what investors expect to be a large loss with a notice on its website by Wednesday, the official from the corporate communications team said.

More here: http://www.reuters.com/article/2014/08/19/malaysia-airline-results-idUSL4N0QP22N20140819

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Airasia X Chalks up RM 129m loss in Q2 2014

 

These losses are attributable to the third consecutive quarter of significant year-on-year ASK capacity increases over 40%, which resulted in lower yields from a higher proportion of promotional fares used to stimulate new demand creation to fill up the new capacity. Our experience suggests that new capacity typically takes about 12 months to break-even. We are already seeing yield growth, as measured by year-on-year RASK growth improve from –15% in Q4-2013, -12% in Q1-2014, and now –7% in Q2-2014. Based on forward sales to-date, we expect to start generating positive year-on-year RASK growth in the second-half of this 2014 year.

Although the capacity expansion created short-term earnings pressure, the Company believes that the investment will bear fruit in the long-term. The Company believes that it now has the highest market share of passengers carried from Malaysia to its core markets in Australia, China, Korea, Japan, and Taiwan. It has also seen a significant increase in the number of connecting passengers between North Asia and Australia, as a result of additional frequencies added to the routes in these markets.

Source: http://announcements.bursamalaysia.com/EDMS/edmsweb.nsf/all/927719B39F7BF20A48257D3900357982/$File/AAX%20Quarterly%20Announcement%20-%20Q2%202014%2012.8.2014%20(Bursa).pdf

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Higher operating costs drag AirAsia X into the red in Q2 2014

 

KUALA LUMPUR: AirAsia X Bhd, the long-haul low-cost airline affiliate of the AirAsia Group, posted net losses of RM128.78mil in the second quarter ended June 30, 2014 as it was impacted by higher operating expenses but it expects to return to profitability.

Its chief executive officer Azran Osman-Rani said on Tuesday although its capacity expansion had put short-term pressure on earnings performance, the long-term strategic advantages were very compelling.

"We now have our strongest route network, with multiple cities in each of our markets, and strong frequencies that lead to convenient transfer connections. As we now have achieved overall market leadership, we have stablised our network, with quarter-on-quarter available-seat-kilometre (ASK) growth slowing down to single-digit rates," he said.

Azran also said being the lowest unit-cost airline operator and leveraging on the strength of the AirAsia global brand and customer base, it has an unrivalled strong position for the future.

"As we approach the end of the year after 12 months since we added a lot of new capacity in Q4, 2013, we expect revenue-per-available-seat-kilometre (RASK) yields to return to positive growth and reach the levels recorded before the expansion.

"This in turn will return us back to profitability, particularly as global fuel prices are expected to soften, while Asian currencies are expected to stabilise. We are already seeing yields catch up in Taipei, the first route to have a doubling of capacity to twice-weekly services that commenced in July 2013," he said.

Azran said AirAsia X expects to maintain positive operating cashflow and positive net cash flow for the full year, on the back on an expected stronger performance in the second-half of 2014.

"The 50 next-generation A330-900neo aircraft ordered will give us a huge lead over other players in this space, and ensure that we can fully realise our growth potential from the two new hubs that we have invested in, as well as other future hubs once the opportunity materialises", he added.

In Q2, 2014, AirAsia X's revenue rose 36.7% to RM671.61mil from RM491.13mil a year ago. However, net losses widened to RM128.78mil from RM32.30mil. Losses per share were 5.4 sen compared with 12.10 sen.

Total operating expenses jumped 59% to RM807.33mil in Q2, 2014 from RM507.50mil a year ago.

The biggest chunk of the operating costs was due to aircraft fuel expenses which increased to RM390.61mil from RM231.07mil.

It also said maintenance, overhaul, user charges and other related expenses increased to RM157.37mil from RM101.51mil.

For the first half ended June 30, 2014, its net loss was RM140.06mil compared with a net profit of RM17.89mil in the previous corresponding period. Revenue increased 38.4% to RM1.421bil from RM1.026bil.

AirAsia X said yield, as measured by revenue-per-available-seat-kilometre (RASK) fell 7.0% to 10.79 sen in Q2, 2014 from 11.60 sen a year ago as it increased capacity and took steps to boost load factor.

The reasons were the significant capacity increase of 48.2% of available-seat-kilometre (ASK) from June 30, 2013 and the need to stimulate demand to achieve load factor of 80.4% in Q2, 2014.

Revenue from passenger seat sales on scheduled flights increased by RM18.0mil, or 6.0%, to RM316.1mil for Q2, 2014 from RM298.20mil a year ago. This increase was primarily due to an increase of both ASKs and revenue-passenger-kilometre (RPKs) from 4.3 billion and 3.5 billion in Q2, 2013 to 6.3 billion and 5.0 billion respectively in Q2, 2014.

"Our passenger load factor has decreased to 80.4% in Q2, 2014 as compared to 81.8% for Q2, 2013. Average passenger fares decreased 23.7% to RM388.07 in Q2, 2014 as compared to RM508.84 in Q2, 2013 primarily due to the competitive fares resulted from significant increase of ASK after period ended June 30, 2013," it said.

AirAsia X also said its capacity expansion into new cities in its core markets, such as Nagoya, Xian, and Chongqing, as well as additional frequencies to cities such as Sydney, Melbourne, Taipei, Seoul, and Tokyo have increased its Fly-Thru connectivity and attracted new passenger traffic flow that now uses KLIA2 as a regional aviation hub.

"Notably, the company has approximately tripled its market share of passengers travelling between North Asia and Australia on a one-stop service, generating a significant new customer base this year compared to the previous year," it said.

AirAsia X said it continues to operate a higher number of flights for charters and wet-leases, with total revenues from this segment growing from RM33.0mil in H1, 2013 to RM148.6mil in H1, 2014.

"These flights are not captured in the ASK and RPK tabulations as they are unscheduled flights.

"Ancillary revenue grew by 48.2% on-year to RM290.8mil in H1, 2014, compared to RM196.3mil in the previous period, resulting in an ancillary revenue per passenger of RM138.50 from the 2.1 million passengers carried," it said.

Its cargo segment contributed RM59.3mil for H1, 2014 up 43.8% on-year.

AirAsia X said resultant unit-revenue yield, as measured by RASK was 10.79 sen in Q2, 2014, a -7% on-year decline, and 11.44 sen in 1H14, a -10% on-year decline.

"The rate of decline in RASK has been steadily improving from -15.1% in Q4, 2013 and -12.4% in Q1, 2014.

"Based on forward sales to-date and barring any unforeseen macro-factors, the company expects RASK to resume positive growth in the second-half of this year, as the capacity expansion last year matures and the rate of capacity growth progressively slows down.

"Although the RASK yields have declined this year from 2013, they remain higher than the RASK yields recorded in 2010, 2011, and 2012, signalling overall route network portfolio maturity. The company continues to target a positive growth in RASK for the full year of 2014 from 2013," it said.

AirAsia X said it continues to maintain positive operating cashflow in Q2, 2014 of +RM81.2mil, and +RM212.8mil for H1, 2014.

"Net cash flow was also positive at +RM12.8mil in Q2, 2014, as there were no capital expenditure incurred from financing aircraft on-balance sheet (the additional aircraft was on operating lease), no material new pre-delivery-payment financing for future aircraft, and no further capital investments in associates.

Source: http://www.thestar.com.my/Business/Business-News/2014/08/19/Higher-operating-costs-drag-AirAsia-X-into-the-red-in-Q2-2014/

Airasia X Press Release:

http://airasiax.listedcompany.com/newsroom/PressReleases_2Q2014.pdf

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AirAsia X records 2Q2014 loss as Australia underperforms. But long-term prospects are still bright

 

AirAsia X incurred a large loss in 2Q2014 driven by a weak performance on Australian routes, where large capacity gains from 2H2013 continue to impact yields. The MYR129 million (USD40 million) loss for 2Q2014 marks the third consecutive quarter of losses for AirAsia X, which has seen its stock price slip by over 30% since its Jul-2013 initial public offering.

But the long-haul low-cost carrier group expects significant improvements in 2H2014 as the rate of capacity growth slows in its core Malaysian market, allowing for the capacity added over the past year to be absorbed. AirAsia X is also reducing capacity slightly on two of its weakest routes, Sydney and Perth, a sensible move given the market conditions in Australia.

While the losses have been disappointing, strategically AirAsia X has improved its position significantly over the last year. The group has established two new joint ventures and is gaining market share in key medium-haul markets from Malaysia, putting it in an enviable position as rival Malaysia Airlines (MAS) struggles and restructures.

 

CAPA Analysis: http://centreforaviation.com/analysis/airasia-x-records-2q2014-loss-as-australia-underperforms-but-long-term-prospects-are-still-bright-183044

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AirAsia posts Q2 net profit of RM367m, boost from forex gains

 

KUALA LUMPUR: AirAsia Bhd group posted net profit of RM367.15mil in the second quarter ended June 30, 2014, up nearly 530% from the RM58.34mil a year ago, boosted by foreign exchange gains.

The low-cost carrier said on Wednesday the forex gains on borrowings jumped to RM202.92mil, a stark contrast from the forex loss of RM122.19mil a year ago.

However, its operating profit fell to RM174.18mil from RM210.09mil a year ago. AirAsia attributed the lower operating profit to higher aircraft fuel expenses, which rose to RM581.71mil compared with RM498.61mil a year ago.

Its revenue rose 5.1% to RM1.311bil from RM1.246bil a year ago. Earnings per share were 13.20 sen compared with 2.10 sen.

"The revenue growth was supported by a 1% growth in passenger volume while the average fare was down 1% at RM157 as compared to RM159 achieved in 2Q13.

"Ancillary income per passenger increased by 13% to RM45 year-on-year. The seat load factor was at 80% which is consistent with the same period last year," it said.

It pointed out the group's cash used in operations was RM89.2mil, compared to cash from operations of RM78.8mil in the immediate preceding quarter ended March 31, 2014.

"Net cash flow in the quarter amounted to a RM153.5mil outflow, as cash out flows from investing and operations activities exceeded financing cash in flows," it said.

AirAsia said for the first half ended June 30, its earnings rose 210% to RM506.87mil from RM163.14mil in the previous corresponding period.

Operating profit was RM401.21mil compared with RM456.68mil a year ago. Fuel expenses rose to RM1.112bil from RM1.021bil. Its revenue was higher by 2.6% to RM2.613bil from RM2.547bil.

Full report: http://www.thestar.com.my/Business/Business-News/2014/08/20/AirAsia-posts-Q2-net-profit-of-RM367m/

Bursa Malaysia filing: http://announcements.bursamalaysia.com/EDMS/edmsweb.nsf/all/1867132D0FA8CC0048257D3A0039C31E/$File/AirAsia_Bursa%20Announcement%20-%20Q2%202014%20(20%20Aug%202014).pdf

 

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AirAsia Net Profit Rises on Foreign-Exchange Gains

Malaysian Budget Carrier's Operating Profit Drops on Higher Fuel Prices and Losses From Affiliates

Malaysian budget carrier AirAsia Bhd. on Wednesday reported a surge in net profit in the second quarter, largely because of foreign-exchange gains on loans.

However, operating profit was down 17% to 174 million ringgit ($55 million) as fuel prices were higher and the airline's affiliates reported losses. AirAsia's fuel bill, the biggest cost for the airline, rose 17% in the quarter to 582 million ringgit.

AirAsia founder and Group Chief Executive Tony Fernandes said he is working on a plan to revive the airline's associates that involves scaling back operations and stopping flights on routes where the airline loses money.

Full report: http://online.wsj.com/articles/airasia-net-profit-rises-on-foreign-exchange-gains-1408541191

[BC Tam 2]

..... working on a plan to revive the airline's associates that involves scaling back operations and stopping flights on routes where the airline loses money.

No easy task, considering there will be more and more of the airbuses arriving and they need to be up there in the air with paying pax's

In a nutshell, I think the overall concern is overcapacity

[flee 5]

No easy task, considering there will be more and more of the airbuses arriving and they need to be up there in the air with paying pax's

In a nutshell, I think the overall concern is overcapacity

Yes, they blame "irrational" competition - MH cutting its fares to fill planes has caused a lot of problems on yield. That was why Malindo jet is also not doing well.

 

With MH restructuring, the over capacity problems might ease a little and yields might improve. I think AK's problems are fewer than those faced by FD and QZ. QZ has stopped its fleet expansion due to the currency devaluation and tough market conditions. FD is still taking in new planes but the military coup effects are starting to wear out and tourists are returning.

 

Cutting flights is easier said than done - some routes are strategic and cannot be cut too drastically. So it is easier said than done!

 

Q3 is not going to see much difference as they have already reported that forward bookings are below 2013 levels. They also note that pax are booking tickets later than usual...

 

Serves them right - with refunds non existent, no one is going to commit to long term bookings!

[geoff.leo 0]

I think the AirAsia group has done extremely well if you put things into perspective.

 

In Malaysia, they've had to contend with 2 competitors hell bent on filling up seats without giving jack about profits.

 

In Thailand, they've had to contend with the endless political crisis. Thai and NokAir would love to have AirAsia Thailand's results.

 

In Indonesia, the overcapacity and rupiah factor is an industry-wide problem. They've done the right thing not to go into an insane domestic battle with Lionair and Garuda - just ask Tigerair Mandala, Sriwijaya, Batavia, etc. They've built themselves a nice niche in Indonesia's international market. They may have swung into an operational loss, but it's miniscule compared to the problems now facing Garuda. And no one really knows Lionair's shady financials.

 

AirAsia X may be losing money. But at least they are manageable. And they add significantly to the bottomline of the overall AirAsia group. The long-term outlook for them remains very promising.

 

Problems remain in the Philippines. India and Japan will remain challenging.

 

But this is a region where even the best run airline (Singapore Airlines) is barely breaking even at 1-2% operating margin.

 

How is a double digit operating margin bad?

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Airasia X Investor/Analyst Slides:

http://airasiax.listedcompany.com/misc/qr/presentation_slide_2Q2014.pdf

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AirAsia's fortunes hinge on MAS

 

http://www.thestar.com.my/Business/Investing/2014/08/21/AirAsia-fortunes-hinge-on-Malaysia-Airlines/

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Airasia Press Release:

http://www.airasia.com/docs/common-docs/investor-relations/aa_2q14_press_release.pdf

Analyst Presentation:

http://www.airasia.com/docs/common-docs/investor-relations/aa_2q14_analyst_presentation.pdf

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AirAsia 2Q profits drop as its Malaysian unit grapples with excess aircraft. But outlook improving

 

AirAsia has reported a drop in profits at its Malaysian short-haul subsidiary for 2Q2014 while its affiliates in India, Indonesia, Philippines and Thailand were all in the red. But Asia’s leading LCC group is confident market conditions are improving, leading to improved results in 2H2014 and 2015.

The outlook in Malaysia should particularly improve as AirAsia is in a position to benefit from the upcoming restructuring at Malaysia Airlines (MAS). AirAsia has seen profits slide over the past year due to rapid capacity expansion at MAS and Lion Air Group’s new Malaysian affiliate Malindo Air, pressuring yields.

Malaysia AirAsia has responded by slowing down expansion, increasing ASKs by a paltry 3% in 1H2014 despite having a much larger fleet than one year ago. Anticipated capacity cuts at MAS as it restructures could enable AirAsia to reaccelerate growth and restore aircraft utilisation rates to more normal AirAsia levels.

The AirAsia Group reported on 20-Aug-2014 a drop in operating profitability across all of its airline subsidiaries and affiliates for 2Q2014. The group’s largest and only fully owned carrier, Malaysia AirAsia (MAA), was still in the black. Its four affiliates – Thai AirAsia (TAA), Indonesia AirAsia (IAA), Philippines AirAsia (PAA) and newly launched AirAsia India (AAI) – were all in the red with collective losses offsetting the profit at MAA.

This report focuses on MAA’s results and outlook. A second report to be published within the next few days will analyse the results and outlook of TAA, IAA and PAA.

Full CAPA Analysis here: http://centreforaviation.com/analysis/airasia-2q-profits-drop-as-its-malaysian-unit-grapples-with-excess-aircraft-but-outlook-improving-183392

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Tragedies of MH370, MH17 deal severe blow to MAS results

 

Malaysia Airlines (MAS) sunk deeper into the red in the second quarter ended June 30, 2014 (Q2, 2014) with net losses of RM307.04mil compared with net losses of RM175.98mil a year ago as it was impacted by the tragedies involving flights MH370 and MH17.

The disappearance of Malaysia Airlines flight MH370 in March 2014 continued to impact the airline's Q2, 2014 financial results with MAS reporting a net loss of RM307mil due to lower yield and seat factor.

Adding to the earlier loss of RM443mil in Q1, 2014 the national carrier's first half 2014 results stood at a loss of RM750mil, 65% more than the previous corresponding period in 2013, it said on Thursday.

Group chief executive officer, Ahmad Jauhari Yahya said: "We expected the impact of MH370 on the performance in Q2, 2014. Given that, our team put in much hard work and effort to regain market confidence and rebuild sales.

"Tragically, just as we were beginning to see signs of recovery in all regions, we were dealt the blow of MH17.

"We operate in a harsh business environment of stiff competition from regional and global carriers and high operational costs. Coupled with the impact of the two tragedies which have damaged our brand, the need to restructure the company was accelerated.

"The full financial impact of the double tragedies of MH370 and MH17 is expected to hit MAS in the second half of the year," said Ahmad Jauhari.

Full report: http://www.thestar.com.my/Business/Business-News/2014/08/28/Malaysia-Airlines-posts-net-losses-of-RM307m-in-Q2/

Bursa Malaysia filing: http://announcements.bursamalaysia.com/EDMS/edmsweb.nsf/all/838C1165510E746F48257D42003C03B5/$File/BursaMsia%20[MAS-Q2%202014].pdf

Malaysia Airlines warns of poor second-half earnings after jet disasters:

 

http://www.reuters.com/article/2014/08/28/malaysia-airline-results-idUSL3N0QY3ZS20140828

[Geoff R. 0]

Losses of over RM4 million every day so far this year with warnings of things getting worse in the next six months doesn't bode well. Some drastic and painful changes required to turn this one around.

 

Geoff

[Mohd Azizul Ramli 2]

RM 307 mil is not too bad, isn't it? We were warned in advance that it is going to be 'nasty' and 'the worst in history' and all with like 20 research houses expected a minimum of RM 600 mil loss for the quarter alone, I am actually expecting an announcement of a loss in excess of RM 1 billion for the quarter.

 

This is actually not a bad news. No wonder RHB changed their rating from 'Sell' to 'Hold'.

[flee 5]

Remember, they postponed the earnings announcement - it may be that they have deferred some charges or provisions for later in the year, after it is delisted. Also remember, a lot of the losses in the aviation business is due to forex translations. Note that a lot of Airasia Group's Q2 2014 profits derived from that item!

[BC Tam 2]

This is actually not a bad news. No wonder RHB changed their rating from 'Sell' to 'Hold'.

And as of this morning, the former option is no more !!

[Geoff R. 0]

Malaysia Airlines is to cut 6,000 staff as part of recovery plan after being hit by two disasters this year.

The reduction in staff numbers represents around 30% of its workforce of 20,000. BBC

 

The first of several drastic actions to save MH.

 

Sad for all those that will lose their jobs.

 

Geoff

Edited August 29, 2014 by Geoff R.

[leon t 0]

seriously doubt Khazanah will be even able to pull such a staff reduction - MAS Unions and politicians have not come up as yet till the employees are really given the marching orders. It will just be a political mess and reconciliation by Khazanah - just like it have happened a few times before.

[Mike P 0]

seriously doubt Khazanah will be even able to pull such a staff reduction - MAS Unions and politicians have not come up as yet till the employees are really given the marching orders. It will just be a political mess and reconciliation by Khazanah - just like it have happened a few times before.

 

Only those few times before were not in the situation with twin disaster claiming over 500 lives at once, such factor would be a very strong driving motivation.

[leon t 0]

But even without the twin incidents - MAS already lost rm1.1 BIllion ending Dec 2013 and the year before that still was losing millions.

[Mike P 0]

But even without the twin incidents - MAS already lost rm1.1 BIllion ending Dec 2013 and the year before that still was losing millions.

 

What we are trying to debate here is about the employees cut.