Surge in 2Q profit masks underlying challenges for AirAsia

AirAsia Group reported a surge in second-quarter net profit on the back of a tax benefit, but operating profit fell sharply as fuel and maintenance costs increased.

The Malaysian budget carrier said on Thursday that net profit for April-June rose by 147 per cent to RM361.8 million (US$88 million). However, that was mainly thanks to a one-off tax benefit from the sale of aircraft last year and masked underlying challenges, particularly for long-haul arm AirAsia X, which swung into the red.

While group revenue rose 10.3 per cent in the second quarter from a year earlier to RM2.62 billion, net operating profit fell nearly 18 per cent to RM324.8 million.

AirAsia’s load factor, or the percentage of seats filled, fell by 3 percentage points to 86 per cent on average at its operations in Malaysia, Indonesia and the Philippines that are consolidated for accounting purposes.

Capacity at those airlines expanded by 12 per cent, outpacing growth in passenger volumes.

Higher fuel prices weighed, particularly on AirAsia X Bhd where they increased by around 25 per cent from a year earlier. The unit reported a second-quarter loss of RM57.5 million, reversing a profit of RM47.4 million a year earlier.

AirAsia plans to add five more aircraft to its fleet through operating leases in the second half of 2018 and deploy them to AirAsia X Malaysia and AirAsia X Thailand, it said in a statement.

A month ago, AirAsia X placed an order for 100 A330neo passenger jets worth US$30 billion at list prices, with deliveries scheduled to start in the second half of 2019. AirAsia X is Airbus’ biggest customer for the long-haul widebody aircraft.

Group chief executive officer Tan Sri Tony Fernandes said in a series of tweets in July that AirAsia X will pursue an IPO of its Thai arm “soon” as it looks to restructure itself into a group holding company along the lines of its parent AirAsia Group. — Reuters