KUCHING: An 18 per cent drop year on year (y-o-y) in AirAsia Group Bhd’s (AirAsia) cumulative financial year 2018 (FY18) normalised net profits of RM944.7 million marked the first quarterly dip since 2015 as analysts saw fuel and lease expenses dragging the low cost carrier.
MIDF Amanah Investment Bank Bhd (MIDF Research) said the RM944.7 million net profit accounted for 86 and 71 of the firm and consensus’ estimates respectively.
This deviation was caused by the 38.5 per cent increase in fuel price expense to RM3.9 billion, it said, in addition to higher operating lease expenses due to the completion of AirAsia’s sale and leaseback transaction with BBAM Ltd Partnership.
“The group’s FY18 revenue was up by 9.2 per cent y-o-y to RM10.6 billion,” it observed in a note. “The robust growth was due to higher passengers carried in 4QFY18, recorded at 12.1 million which was the highest quarter in FY18 amidst seasonal factors.”
Meanwhile, AirAsia’s total passengers carried in FY18 grew by 13.7 per cent to 44.4 million coming from an average load factor of 85 per cent which MIDF Research deemed was reasonable as the group embarked on capacity expansion via increased frequencies and net addition of 18 aircraft.
The increase in passengers which contributed to higher FY18 ticket sales of 11.5 per cent to RM7.7 billion, also resulted in ancillary income revenue to grow by 16.7 per cent y-o-y to RM2.1 billion.
“Notably, baggage fees represented 46 per cent of ancillary revenue. The other driver for the strength in ancillary income was the dynamic pricing and ancillary personalisation which facilitated target marketing.
“For instance, the customisation of AirAsia’s website and app to individual visitors has boosted conversion rates to reach above five per cent.”
Going forward, Kenanga Investment Bank Bhd (Kenanga Research) saw that management is still planning to add 22 aircraft in 2019 in their bid to grow market share, while remaining hopeful that markets like Indonesia will improve from the recent natural disasters.
“As for fuel hedging, management hedged against Brent oil in FY19 at 52 per cent at US$63.41 per barrel,” it said.
MIDF Research meanwhile said AirAsia’ss digitalisation strategy is expected to the propel cost rationalisation via the closure of its third-party operated call centres by June 2019 due to automation.
Operationally, AirAsia has partnered with Airbus and Palantir to establish an integrated big data platform which includes forecast of predictive maintenance and efficient scheduling of parts with a potential saving of USD0.04m per aircraft per year.
“Apart from that, the growth in ancillary income will be bolstered by RedCargo revenue which is expected to double next year.
“We opine that this is achievable following Tasco Bhd’s appointment as RedCargo’s logistics partner where the group could leverage directly on Tasco’s freight forwarding services at possibly lower rates.”