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AirAsia revenues up but profits hit by rising fuel costs

Asian lowcost carrier AirAsia saw second quarter revenue rise 10% to RM2.62 billion.

Operating profit for the three month period to June 30 was RM438.5 million while profit after tax was RM315.3 million. Ancillary revenues were up 4% for the quarter to RM492.6 million.

The carrier said revenue growth was driven by a “strong” load factor of 86% and 13% increase in passengers carried, to 10.88 million, compared to the same quarter last year.

Net operating profit stood at RM324.8 million despite much higher overall costs in fuel and overall aircraft maintenance and overhaul expenses.

Operating cash flow for the quarter was at RM1.18 billion and net cash flow was RM58.4 million.

The Airasia group includes operations in Thailand, Malaysia, Indonesia and the Philippines.

The carrier said costs were “slightly higher” largely due to the impact of higher fuel prices as well as an addition of 22 aircraft on operating lease.

AirAsia said “the group’s airline-related costs were well contained as a result of higher aircraft utilisation, active management on route rationalisation despite higher fuel, operating costs, maintenance and overhaul expenses”.

Cost per Available Seat Kilometre (“CASK”) including fuel increased slightly by 4% year-on-year.

AirAsia Group Berhad Group chief executive Tony Fernandes said: “In general, second quarter is a less travelled period, hence a slower season for air travels.

“There was also pressures on fare prices leading up to the 14th General Elections in May 2018.

“On top of that, our Indonesia operations has been affected by the volcanic activities since 4Q2017 and the recent eruption by Mount Agung in the second quarter this year.

“As a whole, our operating profits were largely impacted by the rising global fuel prices and hence overall fuel related costs have gone up.

“ Despite all adversities and circumstances, our financial performance was commendable, recording 125% up in net profits to RM315.3 million.”

Fernandes added: “Going into the third quarter of 2018, our group load is seen to hold steady despite the added seats.

“Many airlines have reported net operating losses for the 1H2018 due to higher fuel prices. The higher fuel cost is an inevitable crisis for everyone as long as there is a need for fuel consumption.

“We will continue to remain cost discipline in all areas in order to maintain healthy profit margins.

“For the full year, we are looking at a group load factor of 85%. We will emphasize our One AirAsia initiatives to further reduce costs by 5% in workforce reduction for non-airline operating divisions, while improving the overall operational efficiencies and actively monitor each route’s profitability.

“As for fuel, we adhere to our policy by actively hedging according to our forward bookings. Our ancillary and data initiatives, will be revenue enhancing while off-setting higher fuel prices in time to come.

“Our fare price will be adjusted according to the fuel price movements, and we foresee fuel to be ranged bound in the long run as global demand and supply for fuel rationalises.”

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