AirAsia X slot shift to KL-SG route strategic — Analysts
KUALA LUMPUR: The move by AirAsia X Bhd (AirAsia X) entering into a profit sharing agreement (PSA) with AirAsia Bhd (AirAsia) to the transfer of two slots of the Kuala LumpurSingapore (KL-Singapore) route is a strategic move in maximising the AirAsia Group’s aircraft utilisation.
Both parties agreed to share 50 per cent of the net operating profit for each calendar month for a one year term which may be renewed for another year.
KL-Singapore is one of AirAsia’s most profitable routes as its market share of 26 per cent is the largest amongst the other carriers operating the route such as Malaysia Airlines, Silk Air, Jetstar Asia, Malindo Airways, Scoot, and Singapore Airlines.
Moreover, the KL-Singapore route is the busiest international route in the world with more than 30,187 flights according to the Official Aviation Guide for the period from March 2018 to February 2019 with an average of 82 flights per day.
“The direct impact for AirAsia X would be increased utilisation of its widebody aircraft by 0.2 hours from its current 14.4 hours,” highlighted MIDF Amanah Investment Bank Bhd (MIDF Research).
“Small pockets of unutilised aircraft time will be used along with capacity being doubled to 377 seats with the Airbus A330 compared to 180 seats using the Airbus A320.
“Furthermore, load factor of KL-Singapore route which we opine is higher than 80 per cent will be further boosted through the increase in fly-thru passengers into Singapore from core markets such as China, India, Japan and Korea.”
Financially, MIDF Research projected an annual net operating profit (excluding tax) of RM2.42 million from this PSA shift.
“As we pro-rate this profit for the remaining of FY19, the net profit attributable to AirAsia X is roughly RM0.3 million which is unable to offset the RM8.1 million loss we forecasted for FY19.
“Meanwhile, we estimate approximately RM1.53 million worth of net profit to accrue in FY20, which is minimal from the full year forecast of RM45.6 million.
In addition, AirAsia will be launching four weekly flights from Kuala Lumpur to Taipei to Okinawa in 1QFY20 subject to regulatory approvals.
“The rationale of doing so is to leverage on the high-density short-haul route between Okinawa and Taipei. We do not discount the possibility of more flights being introduced by AirAsia X to serve Okinawa in the future,” MIDF Research added.