jetjockey696
13th Aug 2009, 06:55
LOWER FARES AND LOWER COST PROPELS HIGHER PROFIT
- Passenger Growth of 24%
- Core Operating profit up by 328% to RM128 million
LOW COST TERMINAL SEPANG, 12 August 2009 - AirAsia Berhad today announced that it has recorded a core operating profit of RM128 million for the quarter period ending 30 June 2009, a 328% increase compared to the same period the year before. Group CEO Tony Fernandes said: “Revenue for the quarter grew by 8% to RM657 million driven by robust passenger growth and ancillary income. The core operating profit of RM128 million was more than quadruple the profits achieved in the same period last year.”
He added: “Our results stand in stark contrast to those of most legacy carriers in these troubled economic times. While major legacy carriers are cutting flights, grounding planes, retrenching staff and reporting massive losses, AirAsia is, on the contrary, seeing rising demand, adding more routes, increasing frequency and securing higher profits.”
“Passenger numbers for the period grew by 24% to 3.5 million, largely in response to our three-prong strategy of lowering fares, stimulating travel with innovative and creative marketing and capturing market share. Despite lowering fares by an average of 19%, we still managed to produce strong profit growth with industry leading margins.” He noted that AirAsia has responded swiftly with creative marketing and was able to maintain
its high load factor of 75% despite the lingering fear of the Influenza A/H1-N1 pandemic. While yield (Revenue per ASK) was lower by 12% to 11.9 sen per ASK (largely due to 19% lower average fare of RM160) our unit cost – at 8.0 sen per ASK – tumbled 31% compared to the same period last year.
“It demonstrates management’s dedication and determination in maximizing efficiency and revenues while managing costs diligently,” he said.
Fernandes also highlighted the growing importance of ancillary income to the Company’s bottom line. “Ancillary income grew by 89% to RM95 million. The average ancillary spend per passenger has increased by 52% to RM27. Ancillary income now represents 14.5% of total revenue, a 6 percentage-point increase from the same period last year.
“With new products and services, this business unit is expected to grow – unearthing newrevenue streams for the Company. We have launched a low cost courier service and AirAsia Savers Account (co-branded savings account with CIMB) in July. There are six more ancillary income initiatives in the pipeline waiting to be launched within the year.”
On its overseas operations, Fernandes said: “AirAsia Thailand had performed well despite the weakened consumer sentiment caused by the domestic political situation,exacerbated by the second quarter being a seasonally weak quarter for Thailand. Yet AirAsia Thailand managed to contain losses to THB81 million (RM8.2 million) for the period. The outlook for Thailand is positive, the passenger growth numbers looks satisfactory and TAA has captured significant market share. In addition, the Thai operation is enjoying the cost benefits of the increased number of Airbus A320 aircraft in its fleet.”
He added: “AirAsia Indonesia’s operation has made commendable progress to improve its cost structure and narrow down losses to IDR65 billion (RM21.8 million). We have added a significant capacity addition of 56% in the period and this necessitated lower fare in order drive high traffic growth. This strategy has proven to be successful; we have carried 47% more passengers and maintained load factors of 75%. Despite the loss incurred in the second
quarter, the third quarter looks very promising. Response to the new Bali-Perth route exceeded expectations and we have increased the frequency from once a day to twice a day even before the launch of the maiden flight. This will help underpin a sustained profitable performance going forward.”
Outlook “The current economic climate is well-suited for a low cost airline as consumers have become more price conscious and look for the best value. With our lowest unit cost base, we have the flexibility to reduce our already low fares without hurting our bottom line. Other airlines are offering aggressive pricing just to try and maintain their existing passenger base but in this intensely competitive market, the only sure winner is the one with the lowest unit cost base,” said Fernandes.
“In order to simplify and make our products more irresistible, we have abolished administrative fee and now have a simple “all-in fare” pricing structure. This strategy has already proven successful in driving strong traffic growth and expanding market share. Based on forward booking trend in the third quarter, the underlying passenger demand remains positive and the Company should be able to maintain a similar growth momentum enjoyed in
the first half of the year.” On the outlook, Fernandes said: “Based on the forward booking trend, the underlying passenger demand in the third quarter remains positive. The passenger growth rate should be similar to the levels achieved in the first half of 2009.” He reminded, however, on the
seasonality aspect of the business whereby the third quarter is the seasonally weakest quarter due to the Ramadan fasting month.
On fuel prices, Fernandes said AirAsia continues to purchase fuel on the spot market. “The current fuel price, although higher relative to the first half of 2008, is substantially lower than the US$162 per barrel we paid in the third quarter 2008. Other cost items are expected to remain low as we extract further efficiency gains and benefits of economies of scale,” added
Fernandes.:ugh:
- Passenger Growth of 24%
- Core Operating profit up by 328% to RM128 million
LOW COST TERMINAL SEPANG, 12 August 2009 - AirAsia Berhad today announced that it has recorded a core operating profit of RM128 million for the quarter period ending 30 June 2009, a 328% increase compared to the same period the year before. Group CEO Tony Fernandes said: “Revenue for the quarter grew by 8% to RM657 million driven by robust passenger growth and ancillary income. The core operating profit of RM128 million was more than quadruple the profits achieved in the same period last year.”
He added: “Our results stand in stark contrast to those of most legacy carriers in these troubled economic times. While major legacy carriers are cutting flights, grounding planes, retrenching staff and reporting massive losses, AirAsia is, on the contrary, seeing rising demand, adding more routes, increasing frequency and securing higher profits.”
“Passenger numbers for the period grew by 24% to 3.5 million, largely in response to our three-prong strategy of lowering fares, stimulating travel with innovative and creative marketing and capturing market share. Despite lowering fares by an average of 19%, we still managed to produce strong profit growth with industry leading margins.” He noted that AirAsia has responded swiftly with creative marketing and was able to maintain
its high load factor of 75% despite the lingering fear of the Influenza A/H1-N1 pandemic. While yield (Revenue per ASK) was lower by 12% to 11.9 sen per ASK (largely due to 19% lower average fare of RM160) our unit cost – at 8.0 sen per ASK – tumbled 31% compared to the same period last year.
“It demonstrates management’s dedication and determination in maximizing efficiency and revenues while managing costs diligently,” he said.
Fernandes also highlighted the growing importance of ancillary income to the Company’s bottom line. “Ancillary income grew by 89% to RM95 million. The average ancillary spend per passenger has increased by 52% to RM27. Ancillary income now represents 14.5% of total revenue, a 6 percentage-point increase from the same period last year.
“With new products and services, this business unit is expected to grow – unearthing newrevenue streams for the Company. We have launched a low cost courier service and AirAsia Savers Account (co-branded savings account with CIMB) in July. There are six more ancillary income initiatives in the pipeline waiting to be launched within the year.”
On its overseas operations, Fernandes said: “AirAsia Thailand had performed well despite the weakened consumer sentiment caused by the domestic political situation,exacerbated by the second quarter being a seasonally weak quarter for Thailand. Yet AirAsia Thailand managed to contain losses to THB81 million (RM8.2 million) for the period. The outlook for Thailand is positive, the passenger growth numbers looks satisfactory and TAA has captured significant market share. In addition, the Thai operation is enjoying the cost benefits of the increased number of Airbus A320 aircraft in its fleet.”
He added: “AirAsia Indonesia’s operation has made commendable progress to improve its cost structure and narrow down losses to IDR65 billion (RM21.8 million). We have added a significant capacity addition of 56% in the period and this necessitated lower fare in order drive high traffic growth. This strategy has proven to be successful; we have carried 47% more passengers and maintained load factors of 75%. Despite the loss incurred in the second
quarter, the third quarter looks very promising. Response to the new Bali-Perth route exceeded expectations and we have increased the frequency from once a day to twice a day even before the launch of the maiden flight. This will help underpin a sustained profitable performance going forward.”
Outlook “The current economic climate is well-suited for a low cost airline as consumers have become more price conscious and look for the best value. With our lowest unit cost base, we have the flexibility to reduce our already low fares without hurting our bottom line. Other airlines are offering aggressive pricing just to try and maintain their existing passenger base but in this intensely competitive market, the only sure winner is the one with the lowest unit cost base,” said Fernandes.
“In order to simplify and make our products more irresistible, we have abolished administrative fee and now have a simple “all-in fare” pricing structure. This strategy has already proven successful in driving strong traffic growth and expanding market share. Based on forward booking trend in the third quarter, the underlying passenger demand remains positive and the Company should be able to maintain a similar growth momentum enjoyed in
the first half of the year.” On the outlook, Fernandes said: “Based on the forward booking trend, the underlying passenger demand in the third quarter remains positive. The passenger growth rate should be similar to the levels achieved in the first half of 2009.” He reminded, however, on the
seasonality aspect of the business whereby the third quarter is the seasonally weakest quarter due to the Ramadan fasting month.
On fuel prices, Fernandes said AirAsia continues to purchase fuel on the spot market. “The current fuel price, although higher relative to the first half of 2008, is substantially lower than the US$162 per barrel we paid in the third quarter 2008. Other cost items are expected to remain low as we extract further efficiency gains and benefits of economies of scale,” added
Fernandes.:ugh: