Malaysia’s AirAsia Net Profit Jumped 40.8% On Year
Malaysian budget airline AirAsia Bhd. said Monday net profit for the second quarter jumped 40.8% from a year ago, driven mainly by lower expenses, including fuel costs and taxes.
Net profit for the April-June period rose to 342.12 million ringgit (US$84.63 million) from MYR243.03 million a year ago, the company said in a stock-exchange filing. Revenue rose 22.55% to MYR1.62 billion from MYR1.32 billion a year earlier.
“Based on our performance and trend for the first half of the year, we believe 2016 will be a very good year for the company,” AirAsia’s group chief executive Tony Fernandes said in a press statement.
Demand in Malaysia remained extremely robust and he sees this improving in the coming quarters as consumer sentiment picked up in the domestic economy, he said. Indian travelers entering Malaysia grew by 34% on year at AirAsia, he added.
The company expects load factor, a measure of how full planes are, in Malaysia to be 90% in the third quarter ending September, from 87% in the second quarter ended June. It forecast greater-than 80% load factors for India, Indonesia, Thailand and the Philippines.
AirAsia, co-founded and run by Mr. Fernandes, is Asia’s largest low cost airline by passenger numbers. The company has grown from a two-plane operation in 2002 to become a billion-dollar airline, but was weighed down by intense competition from the likes of Lion Air and Jetstar in Southeast Asia.
It returned to the black in the quarter ended December, thanks to lower fuel costs, improved passenger numbers and foreign-exchange volatility. Shares of AirAsia has more than doubled year to date, mainly driven by anticipated gains on the divestment of its leasing arm, Asia Aviation Capital Ltd or AAC.
Research house UOBKayHian said the rise in share price was overdone. “We expect the accretion to equity from the divestment to be minimal as the equity portion will have to be adjusted for the hold company’s (AirAsia) debt,” UOBKayHian said.
In a separate announcement to the local bourse, AirAsia said its board of directors has approved plans to carry out a sale process to divest all or a substantial portion of its equity stake in AAC. AirAsia has appointed RHB Investment Bank, Credit Suisse (Singapore) Ltd and BNP Paribas as joint advisers for the sale, according to the stock exchange filing.
AirAsia has reportedly valued the business unit at up to MYR4.1 billion.
AirAsia wholly owns AAC, which provides aircraft leasing services within AirAsia. AAC began leasing to third parties in September 2015. According to notes accompanying AirAsia’s financial statements, ACC’s profit after tax in April-June period surged to US$18.79 million from US$1.18 million the same period a year ago. AirAsia said AAC’s portfolio of aircraft for lease has increased from 19 in the same period last year to 55 in the quarter.
Meanwhile, Mr. Fernandes said AirAsia remains a beneficiary of current low fuel prices, with all of its associates seeing lower aircraft fuel expense.
For 2016, AirAsia has hedged 75% of its fuel requirements at an average cost of US$56 per barrel, he said. For 2017 It hedged 45% of its fuel requirements at an average cost of US$58 per barrel, he added.
Shares of AirAsia ended Monday 2.05% higher at MYR2.99 a share ahead of the earnings release. The local benchmark stock index ended the day 0.09% lower.
