Wednesday, June 18, 2014

Airasia X - Price So Low ... Can BUY ah!!!

It reported 2014 first-quarter net loss of RM11.3mil, compared with first quarter 2013 net profit of RM50.2mil. In the preceding quarter, AAX had a net loss of RM131.3mil.

Excluding exceptional items such as forex (foreign exchange) gain or loss and tax incentives, its first-quarter core net loss was RM40mil. (First quarter 2013 core net profit was RM14.8mil).

The loss was hit by stiff competition from MAS, particularly on the Australian routes.

While passenger load factor improved to 85.8% in the first quarter 2014, revenue per available seat kilometer fell 12.4% year-on-year to 12.1 sen amid a 63.1% jump in seat capacity.

While some stabilisation signs are seen in AAX’s first-quarter 2014 performance, continued fare dumping by MAS would weigh down AAX’s earnings, particularly on the Australian routes.

Going forward AXX’s results should be in positive territory by the third quarter 2014 onwards.
AAX’s performance will continue to be unilaterally linked to its performance in Australia, which is an extremely challenging market at this stage (May 2014).

Expect second quarter 2014 losses to be larger than the first quarter 2014 as it is a seasonally weak quarter.

Industry observers expect the airline company to benefit from MAS potential restructuring as it would invariably involve capacity rationalization especially MAS’ loss making routes in the Australia segment.

This would remove excess capacity and alleviate pressure on yields which would allow Airasia X to turnaround its operations.

Airasia X’s near term focus would be to capture a larger share of the one stop North Asia Australia segment, where it targeted to double its market share to 20% in 2014.

The airline planned to achieve this by improving connectivity to cut layover time, increase product visibility on third party global distribution system platforms and online travel and implement origin destination in order to maintain competiveness.

Critics however opine MAS’ restructuring could potentially come in as late as 2015 thereby keeping Airasia X yields under pressure until then.

Meanwhile its CEO is optimistic that its newly added capacity in 2013 will start to bear fruit and help turn around its financial performance as early as the second half of 2014.

Airasia X embarked on a big expansion path in the third quarter of 2013 and 60% in the first quarter of 2014m before scaling back.

CEO opine that Airasia X is now (June 2014) similar to how Airasia was operating back in 2008, when its revenue and margins were similar in size to where Airasia was then, with similar pressure on the share price that traded below its IPO.

The company also does not foresee the airline’s other Japan based cornerstone investor.

Airasia X had applied for the final air operator’s certificate license to operate in Indonesia and hopes to obtain it by end 2014.

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