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AirAsia Berhad, Asia’s low cost carrier announced the unaudited results for the six months period ended 31 December 2007 and provide a review of recent notable events and achievements. Tony Fernandes said: “This has indeed been a fantastic year for our airline, highlighted by robust growth, record profits, industry leading performance and award winning standards. Our humble beginnings took flight six years ago, and after 24 consecutive profitable quarters later, we are now the highest profit margin airline in the world.
Revenue for the quarter was RM633 million, a growth of 43% compared to the same period last year. These results were achieved on the back of 21% growth in passenger volume, 17% higher average ticket prices and 49% growth in ancillary income. The demand for our low fares remained strong, our load factors held up at high levels despite significant capacity addition of 40%. Ancillary income rose by 49% to RM42 million, the per capita ancillary spend has increased by 25% to RM15.1 / pax and represents 6.6% of revenues. This performance reflects the increased service penetration and the success of our travel insurance and greater number of hotels booked through our website portal. Due to the higher average fares and ancillary income, yield was 11% higher than the same period last year.
Unit cost was at US3.43 cents per ASK, 7% higher due to unit fuel price increasing by 31% to $101/barrel in the period. Our fuel hedge has partially mitigated the impact of rising fuel prices with a net contribution of RM17 million in the quarter. We continue to achieve cost base improvements with the induction of Airbus A320 aircraft into our fleet. Currently, our Kuala Lumpur and Johor Bahru bases are fully equipped with the new Airbus A320 aircraft. Over the coming months, the Malaysian operations will be operating with Airbus A320 aircraft only.
The combination of higher yields and contained unit cost has resulted in a net profit of RM246 million, a 73% growth as compared to the same period last year. Contrary to initial reservations, our profit margins have expanded despite the soaring fuel prices.”
- The year 2007 marked a number of important milestones in AirAsia’s growth, and the highlights are as follows;
- Profit margins for 12-months 2007 are the highest of any airline in the World.
- Recognition by independent industry observers as The Best Low Cost Airline in Asia awarded by Skytrax and Airline of the year 2007 by CAPA.
- Successfully obtained Government approval to fly to Singapore.
- Overtaking MAS as the largest domestic Malaysian airline with 6.5 million passengers compared to 5.4 million by MAS.
- Kuala Lumpur and Johor Bahru bases are re-fleeted with brand new Airbus A320 aircraft.
- For the full 12 months of 2007, AirAsia’s total revenue was RM1.9 billion. The operations performed well, load factors was at 79% with average fare of RM184. The profit margins achieved for the full year was the highest of any airline in the world.”
Financial Review and Outlook
Outlook
2008 will be the first year that we implement a December year end. We are forecasting for passenger growth of 20% in 2008. The bulk of the new capacity will be injected to international routes which are relatively longer distance sectors. The average stage length therefore is forecasted to rise and this will initially exert pressure for lower yields. However, based on the expectation that some routes will mature and continued strong contribution from ancillary income, we expect yields to remain largely flat for the year. Cost items excluding fuel is expected to reduce further due to the induction of cost efficient Airbus A320 aircraft into the fleet and productivity drivers.
In addition, the continued strengthening of the Malaysian Ringgit against the US Dollars will positively impact on cost as significant proportion of AirAsia’s operational costs is denominated in US Dollars. Barring any unforeseen circumstances, the Directors are confident with the prospects of the Group and expect positive development in 2008.
Fleet Growth – disciplined and planned growth
In the upcoming March quarter, the Group will have a net addition of one aircraft in its fleet. We will take delivery of six Airbus A320 aircraft and return five Boeing 737-300 to the lessor.
Jet Fuel – managing the volatility
The escalating and volatile fuel price remains as our principle challenge for the year. Assuming WTI prices remains above USD90/barrel, 30% of our fuel requirements are hedged for the period of January to June at an equivalent price of USD79.50/barrel. We are looking for suitable structures to hedge the remainder of our fuel requirements.
Associates – on the path to profitability
“We remain very bullish with our associates and believe the developments are headed in the right direction. The Thai operations have improved significantly since it received Airbus A320 aircraft – Thai currently has four Airbus in its fleet. We have seen greater passenger flow and higher yields since the induction of the aircraft. In addition, there is a mark improvement in the unit cost and reliability. The outlook for Thai’s industry has improved, the general election resolved peacefully and the competitive landscape has improved. We believe that the Thai operations are set for return to profitability this year,” said Fernandes.
The Indonesian operation is also showing signs of recovery. The route network reorganization has already produced positive outcomes. Load factor and yields have improved substantially. In addition, the on time performance – a factor that has been a major negative for Indonesia in the past, have improved to the Group average.
Vicky is the co-founder of TravelDailyNews Media Network where she is the Editor-in Chief. She is also responsible for the daily operation and the financial policy. She holds a Bachelor's degree in Tourism Business Administration from the Technical University of Athens and a Master in Business Administration (MBA) from the University of Wales. She has many years of both academic and industrial experience within the travel industry. She has written/edited numerous articles in various tourism magazines.
