KUCHING: AirAsia X Bhd (AAX) will likely record a solid first quarter of the financial year 2016 (1QFY16), given its encouraging forward booking numbers.
The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) noted that AAX’s 1QFY16 operating statistics performed well as expected with its Malaysian operations (MAAX) revenue per kilometre (RPK) increasing at a solid 19 per cent year-on-year (y-o-y) compared with available seat per kilometre (ASK) growth of seven per cent y-o-y.
This resulted in an eight percentage point y-o-y growth in load factor to 82 per cent, it added.
The airline’s ASK growth is also a welcomed sight after an eight per cent y-o-y decline in FY15 following route cancellations to Adelaide, Nagoya and Narita, the research team said.
“During the quarter, AAX took delivery of two new A330’s which found its new home in MAAX and Thailand AAX (TAAX) respectively.
“The new fleet additions would be diverted to serve new routes such as Delhi and Auckland. AAX is scheduled to take delivery of a total of three new A330’s in FY16 with overall ASK growth target of mid double-digit,” it explained.
Meanwhile, it pointed out that AAX’s China and Australian segments saw commendable demand.
“We believe this could be due to Chinese visitors returning to Malaysia in droves with monthly average increase of more than 20 per cent as visa requirements were relaxed,” it opined.
As for its Australian segment, it noted that the new school year in Australia has just started after the summer holidays. This could have helped drive Australian bound traffic, it believed.
All in, MIDF Research commented that forward booking numbers indicate that AAX’s yield growth trend is likely to continue in 1Q16 with a double-digit percentage rise in the average fares.
“In addition, AAX could have benefitted greatly from a 42 per cent y-o-y decline in jet kerosene prices which we estimate to be US$49 per barrel (56 per cent hedged at US$54 per bbl and 44 per cent exposed to the spot market with average rate of US$43.5 per bbl) in 1QFY16 versus US$83.9 per bbl in 1QFY15.
“While the US dollar to ringgit averaged 16 per cent y-o-y higher in 1QFY16 at 4.19 compared to 1QFY15’s 3.62, US dollar denominated costs which account for 70 per cent of overall costs is hedged against 70 per cent foreign currency revenue (US and Australian dollar),” it said.
The research team pegged a ‘buy’ call on the stock.