AirAsia Taps Ancillary Geyser Bolstering Second-Quarter Revenues

Asia-Pacific

Aviation Daily Aug 19 , 2010 , p. 06
Neelam Mathews

AirAsia has secured record second-quarter revenues, “setting the stage for a potentially dynamic second half of 2010,” says the company in releasing its quarterly results.

The carrier announced an after-tax profit of $63 million for the three months ending June 30.

Cost per available seat kilometer was 3.62 cents, an increase mainly due to the rise in fuel cost. The average fuel price in the second quarter last year was $60 a barrel, compared with $100 this year, says AirAsia Group CEO Tony Fernandes.

Revenue for the quarter was up 26%, and passenger numbers grew 11% to 3.9 million. Load factor increased to 77%, compared with 75% in the same 2009 quarter.

AirAsia also saw substantial growth in ancillary income. “We have actually reached our target of RM 40 ($13) spending per passenger that we set for ourselves last quarter. The numbers reaffirm our conviction that in ancillary [revenues], we have unearthed a gushing revenue stream that can boost our bottom line and also serve as a buffer to rising fuel prices,” Fernandes says.

Despite the political turbulence in the country, Thailand's performance was strong. Thai AirAsia recorded 11% growth in passengers carried and also increased its average fare by 12%.

“It’s another fantastic performance and validates our strategy. Thailand will get another boost with further deliveries of the Airbus A320s in the second half of this year, to make their operations an all-Airbus fleet by year-end. And then there’s the potential listing of the company in Thailand next year,” Fernandes said.

Indonesia AirAsia’s turnaround to profitability, which began in the first quarter, took the form of a 272% jump in profit before taxes. Revenue at the Indonesian operation grew 44% year-on-year.

“We have deferred seven A320s for 2011 till 2015 ... no penalty [has been] imposed by Airbus for the deferrals. Capacity concerns at the current low-cost carrier terminal [in Kuala Lumpur] are one reason for the deferments. Another is our strategy to lower our gearing ratio [to] ensure we have sufficient revenue from our operations to fund the purchase of aircraft,” adds Fernandes.