AirAsia 1Q profit falls on absence of one-off gains

By MARK RAO

AirAsia Group Bhd’s net profit plunged 91.6% year-on-year (YoY) on the absence of one-off gains and as higher capacity costs dragged down earnings.

For the first quarter ended March 31 this year (1Q19), the low-cost carrier posted a RM96.09 million net profit against the RM1.14 billion achieved in 1Q18.

Profit in 1Q18 was bolstered by a RM350.3 million gain on disposal of a subsidiary and a RM537.7 million re-measurement gain arising from retained interest in a former unit, the airline said in an exchange filing yesterday.

It also incurred higher costs as capacity grew 17% YoY to 14.27 million passengers which resulted in additional operations staff costs, as well as route and landing charges.

The adoption of the Malaysian Financial Reporting Standards 16 saw the company recognise an additional RM38.2 million provision on its books.

Revenue for the period improved 12.9% YoY to RM2.88 billion on the growth in total passengers carried and load factor rising from 87% to 88%.

This was partially offset by revenue per passenger falling from RM218 to RM212.

Total passengers carried by the airline increased 18% YoY to 12.55 million, though the average fare declined from RM171 to RM167 and cost for available seat per km rose from 13.55 sen to 14.57 sen over the same period.

Average fuel price was flat for the quarter at US$83 (RM348.03) per barrel.

Despite the weaker profitability in 1Q19, the company declared a special dividend of 90 sen, which will be paid to eligible shareholders on Aug 29 this year.

AirAsia said it will continue to grow its presence in the countries it operates in, especially within South-East Asia, and is planning a net fleet growth of 18 aircraft across its air operator certificates. This includes Thailand, Indonesia and Japan.

While the impact of growing US-China trade tensions will be minimal on the group, the company is concerned over the resultant currency weakness and has hedged its fuel requirement for 2019.

“To minimise fuel price volatility, we have hedged 52% to 57% of our fuel requirement for 2Q19 to 4Q19 at average Brent hedge prices of US$61 to US$64 per barrel,” it said.

“The group will continue its focus on its transformation into a travel and financial platform.”

Barring unforeseen circumstances, the airline said it remains positive its overall core results for the group will improve this year compared to 2018.

Earlier this month, AirAsia filed a judicial review to compel the Malaysian Aviation Commission (Mavcom) to resolve the ongoing dispute between the airline and Malaysia Airport (Sepang) Sdn Bhd.

The latter, whose parent company is Malaysia Airports Holdings Bhd, alleged that AirAsia owes RM14 million in unpaid passenger service charges.

In response, the low-cost carrier, alongside AirAsia X Bhd, filed for the review as it claimed it is under the purview of Mavcom as part of the latter’s statutory act.