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First quarter 2009 revenue and profit rises for AirAsia

28th May 2009 - 16:01 GMT | by The Shephard News Team


Despite the economic downturn in the Asia-Pacific aviation industry, AirAsia has announced a core operating profit of RM166 million for the three-month period ending 31 March 2009, a 591% increase compared to the same period the year before. This was on the back of revenue of RM714 million, up 33% from a year ago.

Group CEO Tony Fernandes remarked, “AirAsia once again delivered record profit growth despite operating in one of the most challenging economic environments. Revenue for the quarter grew driven by robust passenger growth and ancillary income. The core operating profit was almost six times the profits achieved in the same period last year.”

According to Fernandes, passenger numbers for the period grew by 21% to 3.1 million as the carrier stimulated the market, captured share from competitors and launched new routes. He noted that load factor was at a respectable 70%. Yields (revenue per ASK) grew by 12% to 13.7 sen per ASK thanks to 5% higher average fare and strong contribution from ancillary income.

The Group CEO attributes the encouraging first quarter result to the company’s success in maximising efficiency and managing costs. Unit cost was at 8.6 sen per ASK, 18% lower than the same period last year.

Ancillary income, a key area for growth, more than doubled to RM91 million due to the strong support of new services including ‘Supersize’ baggage and ‘Pick a Seat’ assigned seating services launched during the period. The average ancillary spend per passenger has increased by 85% to RM29.0. Ancillary income now represents 12.8% of total revenue, a 5.1 percentage point increase from the same period last year.

On its overseas operations, Fernandes noted that AirAsia Thailand had performed exceptionally well to counter the weakening domestic consumer sentiment as a result of the internal political disturbances. AirAsia’s Thai operations delivered an operating profit of THB298 million (RM30.5 million) for the period. Benchmarked against the industry, Thai AirAsia has outperformed industry performance considerably and has captured a significant market share.

Meanwhile, AirAsia’s Indonesian operation produced a small loss of IDR37 billion (RM11.5 million). Currently, the Indonesian operation is operating with eight Airbus A320s and this has helped to structurally improve the operational cost, dispatch reliability and service punctuality. Services to Singapore have been launched from several points in Indonesia
(Jakarta, Bandung, Yogyakarta, Bali) and these have enjoyed strong support with higher yields.

Commenting on the market outlook, Fernandes said, “We have already seen many airlines cut capacity, terminate underperforming routes, retrench staff and mothball a sizeable amount of their fleet. This situation provides unique long-term opportunities for AirAsia, as the lowest-cost producer, to grow rapidly, open new markets, win market share from competitors and speed up the pace of industry consolidation. In short, we’re adding routes, increasing frequencies, hiring more staff, enhancing our capabilities and growing our airline.”

“Our strategy to continuously conduct aggressive promotions and enhance customer service has been successful in driving strong traffic growth. We continue to expand our market share as more and more people switch from legacy carriers and fly with us. Furthermore, our new routes have performed very well and they are already profitable despite being in early
developmental stage."

Based on forward booking trend in the second quarter, the underlying passenger demand remains robust and the ancillary income is also growing strongly. "Cost items are expected to reduce, stemming from efficiency gains and benefits of
economies of scale,” said Fernandes.

“The dramatic cuts in flights and capacity by many of Asia’s legacy carriers have resulted in severe traffic decreases at many of Asia’s airports. This is creating enormous opportunities for AirAsia, as these airports compete to get our business and are more amenable to provide desirable terms and concessions to AirAsia in order to attract our airline. They recognise that AirAsia can deliver significant passenger growth and revenue to their entities.” added Fernandes.

The Shephard News Team


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