AirAsia Group reports Q4 and 2018 results

Lauren Eldershaw
By Lauren Eldershaw February 28, 2019 10:00

AirAsia Group reports Q4 and 2018 results

AirAsia Group Berhad has posted fourth quarter 2018 revenue of RM2.8bn, up 6% over the prior year period. The reason for the 21% capacity addition was to capture more market share and to secure airport slots that the Group wanted, which resulted in a short term pain as fares were down by 6% to RM171, in order to set the Group up for a strong start in 2019.

The large increase in capacity had a huge impact on yield and did not contribute to recovering the cost of fuel at US$92 bbl, which translated to RM254 million in additional fuel expenses in Q4. However, had the Group not added any capacity and kept the passengers carried and average fare constant at RM182, it would have generated an additional RM115 million in 4Q2018.

Also during the quarter, there were numerous one-off items related to the BBAM transaction and change in accounting from owning to leasing of aircraft. Those relating to the BBAM transaction include professional fees of RM101 million, re-recognition of RM29 million for depreciation of five unsold aircraft and accretion of RM16 million finance cost tied to the assets sold. These one-off costs resulted in a net operating loss of RM220.4 million. The total one-off items amounted to RM318 million. Eliminating this amount, the quarter’s performance would have recorded RM98 million.

For the full year, the Group posted a revenue of RM10.6bn, up 9% from the previous year. Profit after tax rose 9% to RM1.7bn, despite much higher fuel cost, weaker ASEAN currencies, closure of Boracay and the prolonged chain of natural disasters in Indonesia.

Revenue per Available Seat Kilometre (RASK) for the Group was recorded at 14.82 sen in 4Q2018, down 4%. RASK was affected due to an aggressive 21% capacity addition.
Cost per Available Seat Kilometre (CASK) including fuel averaged at 16.58 sen in 4Q2018, 27% higher from 13.05 sen in 4Q2017, mainly attributed to aircraft fuel expenses and aircraft lease expenses as a result of change in accounting from owning to leasing of aircraft.

AirAsia Group Berhad Deputy Group CEO Bo Lingam commented: “It was a great 2018, we gained significant market share across the Group and recorded RM1.7bn in profit after tax for the full financial year. Financial results were commendable despite the abnormal fuel hike. We are focused on keeping cost low for all AOCs and will continue to reduce cost further. Staff costs have already been reduced by 4% in 4Q2018 as compared to 4Q2017. We are on target to reduce overall staff cost by 10% via eliminating duplicated roles and moving many key functions to the Group level for better efficiency. We are also closing down the contact centre by June 2019 which will be replaced by our automated chatbot.”

“Despite the much higher fuel cost in FY2018, we still managed to add significant capacity in order to set the Group up for a dominant position in 2019. For this year, we are confident that Thailand, Indonesia and Philippines will make up for fuel cost hike in FY2018 while Malaysia continues to remain a strong profit generator. We have hedged 52% of Brent at USD63.41 for FY2019. Should Brent increase to USD80 bbl, our fuel cost could potentially increase by RM368 mil for the full year’s unhedged portion, of which will be covered by driving more ancillary sales.”

“We are confident that all ASEAN AOCs will be profitable in 2019. We have already witnessed the strong load trend since the start of 2019.”

On the Group’s outlook, AirAsia Group Berhad CEO Tony Fernandes said: “2019 will be the start of AirAsia’s true transformation. AirAsia.com has already generated more than RM16 billion in gross merchandise revenue from our online flight ticket sales in FY2018. This platform is in fact one of the largest revenue generating platforms in Asia today. Hence, we are also increasing our efforts to sell additional travel-related services such as hotels, tours, insurance and more to millions of our guests who fly with us. We intend to transform AirAsia.com into a platform of choice for all to fulfil any travel needs. We believe that this platform has enormous potential and will generate a significant increase in revenue for the Group.”

“It is the first time in 18 years that AirAsia has consolidated its freight belly space. RedCargo has fulfilled 110,000 tonnes of belly space for 2018. The company has generated RM206 mil in revenue for FY2018, and this revenue will double up in 2019 as we have already started to support the eCommerce initiatives in ASEAN. We believe we will be a key freight player in the near future for the markets that we operate in.”

AirAsia has declared a second interim single tier dividend of RM0.12 per share for FY2018 to be paid on 10 April 2019.

“We foresee Vietnam to be the last piece of our joint ventures (JV) in ASEAN within the foreseeable future,” said Fernandes. “This JV will enable us to connect ASEAN passengers to North Asia, namely China, Korea and Japan as we draw passengers closer from one country to another while growing our market presence and our low cost franchise across the region.”

Lauren Eldershaw
By Lauren Eldershaw February 28, 2019 10:00