AirAsia Group announces 2013 financial results

AirAsia Group has reported its results for the quarter ended 31 December 2013 (4Q13) and for the whole of last year.

AirAsia Malaysia (AAM) posted quarterly revenue of RM 1.35 billion, unchanged from 4Q12’s revenue. During 4Q13, AAM recorded a 2% decline in operating profit year-on-year to RM315.01 million mainly due to the increase in routine aircraft C-Checks and lower fares.

AAM posted an EBIT margin of 23% on the back of its continuous cost reduction exercise to ensure the airline “remained a cost leader in an irrational competitive environment”. Profit after tax was reported at RM 252.76 million, down 17% compared with 4Q12.

AirAsia Malaysia CEO Aireen Omar commented, “I am pleased that our cost reduction exercise is continued into 4Q13 and the company was able to achieve a cost per available seat kilometre (CASK) down 10% from 14.11 sen down to 12.77 sen y-o-y. This highlights the drive in our staff to guarantee productivity is maximised and operations are optimised which allow us to further reduce CASK-ex fuel by 14% y-o-y from 6.63 sen to 5.73 sen.”

The company’s revenue, measured in terms of revenue per available seat kilometre (RASK), was reported at 16.64 sen which was a decline of 10% y-o-y. Omar added, “The decline in RASK in 4Q13 was due to irrational pricing by domestic competitors which led us to strategically react to match the pricing. Despite RASK pressure in 2Q13 and 3Q13, RASK in 4Q13 recovered well and outperformed the last two quarters’ RASK numbers.

“We continue to ensure that our cash position remains strong,” Omar continued. “At the end of the reporting period, the company had RM 1.39 billion in deposits, bank and cash balances and we continue to manage our net gearing level which stood at 1.75 times as at 31 December 2013.”

Thai AirAsia (TAA) posted strong revenue of THB 6.50 billion in 4Q13, up 16% from the same period in 2012. Operating profit was down by 52% y-o-y to THB 444.01 million which led to a 40% decrease in profit after tax at THB 425.44. Thai AirAsia’s CEO, Tassapon Bijleveld commented, “Our decline in operating profit was mainly due to depreciation cost of taking aircraft into our own balance sheet and spending on public relationss and marketing during the ongoing political demonstrations in Bangkok. TAA still recorded a solid 81% load factor (from 82% in 4Q12). Ancillary income per pax also saw an increase of 2% y-o-y to THB 370.”

Indonesia AirAsia (IAA) posted an increase of 25% in revenue in 4Q13 to IDR 1,527.4 billion from IDR 1,261.5 billion last year. IAA posted an operating loss of IDR 369.09 billion from an operating profit of IDR 160.72 billion. IAA’s 4Q13 loss after tax was IDR 429.32 billion – down 446% y-o-y. IAA’s CEO, Dharmadi remarked, “The decline in operating profit was mainly driven by the weakening of the Rupiah currency and pushing up dollar-denominated cost such as fuel, maintenance and lease expenses which led to an increase in CASK by 32% which stood at IDR 593.53 from IDR 451.21 y-o-y. The focus now is on a turnaround strategy and optimising the current schedule based on aircraft availability and strengthening of cashflow.”

Philippines’ AirAsia (PAA) has seen its operations in terms of load factor in Manila improving since its move from Clark to NAIA. Maan Hontiveros, PAA’s CEO explained, “We are currently focussing on turning around the airline since the acquisition of Zest Air (now known as AirAsia Zest) by ensuring utilisation is increased and that all the lossmaking routes are terminated. We are looking into consolidation, subject to congressional approval. Since the acquisition and the recent branding exercise, we have seen loads picking up and improve in cash flow. Looking at how PAA is doing, we could expect a turnaround in 2014. The people of Philippines could also look forward to new introduction of international routes which will increase connection into the country and drive tourism.”

Group CEO Tony Fernandes re-iterated that the associates will one day be larger than AirAsia (AAM) as the growth prospects are far greater than Malaysia.

As AirAsia is seen as one brand, the company believes its true value can be viewed if the financial statements are consolidated. By consolidating Thailand, Indonesia and Philippines, the company is able to publish a pre-forma income statement in 2013. Following this, AirAsia Group posted revenue of RM 8.65 billion, but the currency impact in Indonesia caused a small decline in operating profit which stood at RM 1.33 billion. EBIT and EBITDAR margins remain strong at 15% and 26% respectively. The Group carried 42.6 million passengers in 2013 matching its growth in capacity. Even with increased cost in Indonesia operations, the Group managed to maintain low CASK of 12.91 sen (US cents 4.07).

Commenting on the outlook for the Company, Fernandes said, “We are assuming fares will remain at the current level this year, hence we will continue to focus on driving cost down by approximately 7.5%. We have already achieved 2.5% in cost reduction in two months and will increase non-fare revenues to make up in the decline in RASK. Despite seeing signs of competitors being rational by reducing capacity on lossmaking routes, we cannot take it for granted and the Company needs to continue to be creative in driving margins up.

“In terms of cost reduction and looking for margins upside, the company will now be focussing on capacity management by keeping a young fleet and selling its older aircraft to capitalise on the residual value which will help strengthen our cashflow,” Fernandes continued. “We have deferred 7 aircraft in 2014 and 12 in 2015 to later years with the intention to swap those aircraft with the new fuel efficient A320neo.”

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