AirAsia X’s FY16 results surpasses expectations

KUCHING: AirAsia X Bhd’s (AirAsia X) financial year 2016 (FY16) performance surpassed expectations, and analysts observed the group could continue to record a positive performance in FY17.

In a filing on Bursa Malaysia, AirAsia X reported that in the current 12 months ended December 31, 2016, the group recorded a profit after taxation of RM230.5 million as compared to a loss after taxation of RM349.6 million for the comparative 12 months ended December 31, 2015.

According to the research arm of Public Investment Bank Bhd (PublicInvest Research), AirAsia X’s FY16 core net profit of RM251.1 million was above its and consensus’ estimates, accounting for 122.9 per cent and 133.7 per cent respectively, with the discrepancies mainly due to lower-than-expected finance costs.

AirAsia X’s FY16 operating profit of RM276 million was in-line with PublicInvest Research’s estimates however.

“We believe the positive performance will flow through into FY17 and onwards as a result of better cost efficiencies and improvement in its aircraft utilisation,” the research arm said.

Nevertheless, PublicInvest Research remained cautious on the impact of a stronger US dollar on the group’s operating cost (which are aircraft maintenance and fuel costs), though fuel price volatility is expected to be muted as AirAsia X has already hedged 74 per cent of its fuel cost at US$60 per barrel (bbl) (versus current fuel price at US$65 per bbl).

Meanwhile, AirAsia X’s fullyear core earnings of RM251.1 million which turned around from a RM227.6 million loss in FY15, exceeded AllianceDBS Research Sdn Bhd’s (AllianceDBS Research) and the consensus’ expectations.

AllianceDBS Research retained a cautious view on AirAsia X’s earnings outlook in 2017 despite the stronger-than-expected fourth quarter of 2016 (4Q16) results.

“Margin compression is the primary risk from the weaker ringgit, against a backdrop of gradually rising jet fuel prices and stiffer competition from domestic and international peers.

“While the group has hedged 74 per cent of expected fuel requirements, it remains susceptible to US dollar-related costs which made up 68 per cent of FY16 expenses.

“Additionally, the weaker ringgit may induce more selective demand in the outbound long-haul segment; necessitating more judicious capacity addition decisions,” the research house said.

The research house thus conservatively assumed available seat kilometres (ASK) expansion of 10 per cent, lower than the group’s target.

After imputing full FY16 figures, AllianceDBS Research also made changes to its FY17/18F assumptions by revising US dollar-ringgit input to 4.62/4.71 from 4.22/4.37, which raised cost/ASK by three per cent/two per cent, raised yield growth to seven per cent/three per cent from five per cent/three per cent, raised ASK growth to 10 per cent/five per cent from five per cent/five per cent and tweaked load factor to 81 per cent/80 per cent from 80 per cent/80 per cent.