· World’s lowest-cost airline: Cost per available seat kilometre of 12.80 sen (incl. fuel)
· Strong and sustained demand: Passengers carried increased 12% to 9.89 million
· Strong bottom line: Net operating profit of RM374 million was slightly lower by 8% year-on-year, due to one-off costs. Deducting these one-off items, the net operating profit would have been 16% higher
· Margins: EBIT 20%, EBITDAR 38%
· Ancillary revenue: Up 8% to RM49 per passenger, total ancillary income up 23% to RM487 million
· Cash balance: Free cash of RM605 million and net cash flow of RM118.7 million
· Net gearing: Further improved to 1.20 times from 1.33 times year-on-year
SEPANG, 29 NOVEMBER 2017 – AirAsia Berhad (“AirAsia” or the “Group”) today reported its results for the quarter ended 30 September 2017 (“3Q17”).
Unaudited Consolidated Results of AirAsia Berhad
The Group posted third quarter 2017 revenue of RM2.45 billion, up 15% year-on-year from RM2.13 billion in the same quarter last year. Revenue growth supported by a load factor of 87%. Operating profit was reported at RM494 million, lower by 7% from the same quarter last year mainly due to higher aircraft fuel expenses, maintenance and overhaul expenses. Net profit was reported higher by 30% this quarter at RM434 million as compared to RM335 million in 3Q16 as a result of the lower deferred tax.
In 3Q17, Share of results of associates was reported at RM17.5 million.
Comparisons between corresponding quarters are made between the reported 3Q17 financial results and the pro forma consolidated financial results for 3Q16 detailed in note no. 22 of the quarterly statement to Bursa Malaysia prepared on similar basis as in 3Q17 where both PT Indonesia AirAsia and AirAsia Inc. Group of Companies (Philippines) results were consolidated for financial reporting purposes in accordance to MFRS 10.
Revenue Performance
Revenue per Available Seat Kilometre (“RASK”) averaged at 14.76 sen in 3Q17, marginally lower by 1% from 14.98 sen. The Group attributes the slight decrease to lower average fare per passenger of RM172, down by 2% due to the shift in Hari Raya which took place during the second quarter this year versus third quarter last year. However, ancillary income has grown 23% to RM487 million this quarter mainly contributed from the execution of dynamic pricing across the board. Ancillary contribution per pax grew 8% year-on-year to RM49.
Thai AirAsia posted 3Q17 revenue of THB8.75 billion, up 7% from THB8.16 billion in the same quarter last year backed by a 14% increase in passengers carried. The associate company of the Group reported an increase in load factor of 1 percentage point and a decline in fares of 7% year-on-year.
Cost Performance
Cost per Available Seat Kilometre (“CASK”) including fuel averaged at 12.80 sen in 3Q17, up 5% from 12.25 sen in 3Q16 due to the weaker ringgit and higher fuel price. The average fuel price for the Group was USD63 per barrel jet kerosene in 3Q17, compared to USD59 per barrel in the same quarter last year. CASK ex-fuel increased by 5% from 7.86 sen to 8.24 sen largely due to higher staff cost in-line with our focus on growth targets, higher maintenance and overhaul charges.
Thai AirAsia similarly reported an increase in CASK from 4.27 US cents in 3Q16 to 4.37 US cents in 3Q17, largely due to the rise in global fuel price and the nation’s excise tax on jet fuel consumption for domestic flights.
On the 3Q17 financial results, AirAsia Group CEO Tony Fernandes said:
"Overall, the strong demand for air travel has delivered a set of very positive results for the third quarter despite it being a seasonally weaker quarter of the year, despite the rising fuel prices and currency fluctuations.
“We achieved a 12% growth in passengers carried for the Group this quarter despite capacity addition of 14% year-on-year. Our low-cost model has proven to be resilient and has produced continuous growth even when the operating environment appeared competitive and less favourable to many airlines.
“In the consolidated accounts combining our Malaysia, Indonesia and Philippine units for the third quarter, we managed to overcome higher fuel costs with remarkable revenue growth of 15% year-on-year.
“As for Indonedia, we are in the process of finalising the stock market listing of PT Indonesia AirAsia and we expect it to be completed by December 2017. Despite a shift in Raya celebrations to the second quarter this year, we still managed to achieve higher average fares in Indonesia by 19% year-on-year.
“As for our Philippines operations, ancillary per pax went up by 33%, revenue per ASK dipped slightly by 2%, fares was slightly lower by 6% year-on-year due to the weakening of Peso against the USD. There were several one-off costs incurred this quarter in order to efficiently grow our Philippines operations. The one-off costs amounting to RM31 million were for the re-delivery of aircraft, maintenance and overhaul as well as the depreciation of Peso. Philippines’ strong load trend continues into 2018. We are expecting to present a good full year 2017 results for our Philippines operations.
“The first ten months of 2017 was challenging for our Thai associate as financial performance was affected by the crackdown on the Chinese zero dollar tours and the passing of his majesty the Thai King since last year. The Chinese tourists have started to return to Thailand recording 7.39 million pax up by 1% for the last 9 months as compared to 2016. The official one-year mourning period for Thailand ended on 29 October 2017. Despite the less than favourable operating environment in Thailand, Thai AirAsia still came out as the only profitable airline recording net profits of THB472 million during 3Q2017. From July to September 2017, the number of international tourists to Thailand rose by 6.43% to 8.8 million comparing to the same period last year. East Asian visitors accounted for 71% of the international tourists. We foresee a favourable season and a conducive operating environment for Thai AirAsia in the fourth quarter.
“Our associate airline in India has grown tremendously, achieving 99% year-on-year growth on passengers carried and a remarkable 104% year-on-year growth in capacity this quarter. Revenue increased by 126% year-on-year and net loss reduced by 74% year-on-year to INR164 million. AirAsia India will have 14 aircraft by the end of 2017 and 21 aircraft by the end of 2018. We are on target to launch our international routes the minute we achieve 20 aircraft in India next year. We foresee our Indian operations to be very profitable once we start flying regional routes and connecting them to our wide network.
“The Group’s operating net cash flow stands at RM118.7 million and free cash of RM605 million as compared to RM419 million for second quarter 2017. This brings our net gearing ratio down to 1.2 times this quarter as compared to 1.33 times in 3Q2016.
On the Group’s outlook, AirAsia Group CEO Tony Fernandes said:
“I am also pleased to announce that we have launched our first flight for our Japan operations on 29 October 2017, flying from Nagoya to Sapporo. We believe that our group’s current capacity does not serve the actual demand in the markets that we operate in, and we foresee continuous strong demands for air travels especially in the ASEAN region. In conjunction with the expansion to 500 aircraft by 2027, there will be a net addition of 22 aircraft for the group for the full year of 2017 and 33 aircraft for 2018.
“On cost discipline, we have entered into a joint-venture between SATS and our wholly-owned Ground Team Red (GTR) on a Ground Handling Partnership, in which operations will begin in Malaysia and Singapore first. We believe the joint venture will help us to achieve industry standards in providing ground handling services and further drive cost down by 16% in Malaysia in the first year of operations by adopting better technology, best practices and operational expertise. We are expecting to receive the cash proceeds of USD89 million in December 2017 from this joint venture. This is in-line with our One AirAsia’s initiatives to streamline and further reduce cost. We expect this to boost efficiency across the entire group in the coming future.
“In light of materialising our joint venture investments, we have sold our 50% stake of the pilot training centre (AACE) for USD100 million and received the cash proceeds in the middle of November this year. The company has paid out a dividend of 12 sen on 13 October 2017 from this monetization exercise. We have kept our promise in delivering special dividend(s) to our shareholders. We will continue to grow our non-core assets in order to distribute out a special dividend every two years to maximise our shareholders’ returns as and when these assets are monetised.
“On data and digital initiatives, we are starting to see results, the new www.airasia.com website has generated an increase in 6% of air ticket take up in the month of November alone. We are also in the midst of creating payment gateways, namely Wechat Pay, Payoo and Apple Pay. This is just the beginning of AirAsia’s digital journey. In addition to this, we have done the test run on personalisation for predictive take up behavior based on historical passengers data, which resulted in an increase in both the take up rates for meals and baggage.
“In summary, AirAsia continues to strive to maintain its position as the lowest cost airline among our peers by upholding our strong cash flow position and improving business efficiencies. We will continue to expand our footprint in the ASEAN region. We are six months away from incorporating our new group’s holding company, AirAsia Global Berhad. This is an exciting move for us as we embark on our journey to become a true ASEAN airline. We owe our success to the ASEAN countries, our aim is to bring people across the region closer by providing affordable air travel in all the markets that we serve in. We believe that 2017 will be another record year for us.