AAX net loss widens on higher average fuel price, impairment charges

PETALING JAYA: AirAsia X Bhd (AAX) saw its net loss for the third quarter ended Sept 30 widen to RM197.47 million from a net loss of RM43.3 million a year ago mainly contributed by the 28% increase in average fuel price in the quarter under review compared with the corresponding quarter in 2017 and an impairment of RM138.2 million from a joint venture.

Average fuel price was US$65 per barrel in Q317 from US$91 per barrel in Q318.

The group recorded revenue of RM1.08 billion for the quarter, 4% lower than RM1.12 billion for the quarter ended Sept 30, 2017.

For the nine months period, it posted a net loss of RM213.43 million compared with a net profit of RM14.47 million, while revenue was flat at RM3.4 billion compared with RM3.34 billion in the previous year’s corresponding period.

The company recognises the challenges posed by the recent rise in fuel prices, and efforts are being made to mitigate this by boosting ancillary revenue and capacity.

“A new fares structure has been implemented and the company is actively driving up ancillary revenue, which will ultimately improve yields, while management also remains focused on monitoring operating expenses to achieve better cost efficiencies to offset uncertainty in fuel price,” AAX said.

The company expects operational cost ex-fuel to be lower in the coming quarters as it starts to see the fruits from its cost saving initiatives mainly driven by lower aircraft lease rates, cheaper ground handling at foreign stations and from unlocking operational network synergies with short-haul affiliates.

“In order to better serve the growing demand in the Asia Pacific region, AAX Malaysia plans to increase fleet size by two aircraft through operating leases in 2018. One of the two leased aircraft has been delivered in October 2018. AAX Thailand is expecting two additional aircraft by end of 2018.”

However, it said average base fare may be under pressure due to the expected increase in capacity on core established routes, in addition to new routes.

The board is also aware of the deceleration of growth in tourism sector, especially coming from the China market segment which currently contributes to 25% of total revenue. Efforts have been made to mitigate this risk by shifting some of future capacity into other core markets such as Japan, South Korea and India.

The company is also actively monitoring the progress of all associate and joint-venture airlines to ensure better performance. The company expects AAX Thailand to remain profitable for the rest of the year. AAX Thailand will focus on leveraging on the existing strength of the AirAsia Group network and strengthening North Asia markets in the last quarter of 2018.

The company foresees the operational environment to remain challenging in Indonesia and will cease schedule service flights in January 2019. AAX Indonesia will then operate non-schedule service flights moving forward.

“Based on the current forward booking trend, forward loads are ahead of the previous year. Bookings in the coming months are expected to be stronger year-on-year,” AAX said.