Bali disruption to be ‘immaterial’ for AirAsia, group sees strong earnings in third quarter
KUALA LUMPUR: Analysts believe the recent disruption to AirAsia Bhd’s (AirAsia) operations caused from Bali’s Mount Agung erupting last week to be immaterial to the airlines’ overall group’s operating expenditure (opex).
To note, the Bali volcano has resultedindisruptionstohundreds of flights there, including Air Asia. As a result, four of AirAsia’s aircraft had been redeployed from Denpasar to Jakarta, Medan, Kuala Lumpur and Surabaya to serve other routes until volcano activities settle.
Researchers with MIDF Amanah Investment Bank Bhd (MIDF Research) believed the impact to AirAsia’s earnings would be minimal as Bali only contributes eight per cent of the consolidated group’s total average seat per kilometre (ASK).
“The aircraft redeployment would add further support to the growing travel activities to these destinations in the incoming holiday month of December,” it highlighted in a note on the group yesterday, following announcements of the results of its third quarter of financial year 2017 (3QFY17).
Year to date, the group recorded cumulative 9MFY17 core net profit of RM1.1 billion, which came in above MIDF ReseaRCH and consensus expectations accounting for 85 and 82 per cents of full year estimates respectively.
For 3QFY17, MIDF research saw that AirAsia’s core net profit came in stronger with 40.7 per cent year on year (y-o-y) to RM375.3 million. This lessened the impact of the 33.5 per cent y-o-y decline in 1QFY17.
“As a result, 9MFY17 earnings came in lower by 23.4 per cent y-o-y,” it added. “The decline was attributable to the increase in staffs’ cost and marginally higher user charges, due to audit adjustments.”
On this point, the group’s 9MFY17 revenue was up by 41.1 per cent y-o-y to RM7.1 billion. This commendable growth was result of higher passengers carried in 3QFY17, the analysts said, as it saw 9.9 million passengers with a growth of 12 per cent y-o-y.
Meanwhile, MIDF Research remained confident in AirAsia’s management focus to lower its overall opex by leveraging on its large-scale service automation for its customers.
“We opine the positive effects expected to be gradual, coming from various airports as well as cost initiatives in the coming quarters,” it said.
“Taking into account ancillary income’s margin of about 50 per cent, the management is committed in using Artificial Intelligence (AI) to drive ancillary income.
“Further clarity on this initiative will be obtained in 4QFY17.”
Also, in 2018, the group will see a net addition of 36 aircraft to its existing capacity. MIDF Research opined this will lend further growth to its earnings, as it strengthen and expand its market share.
“The group saw positive progression of its market share in Malaysia, Thailand and Philippines operation with Malaysia recording the highest at 54 per cent.