Expansion costs push AirAsiaX into the red
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AirAsiaX recorded a substantial increase in revenues through H1, however the costs of network expansion pressurised yields, forcing the carrier into the red.
“Although our capacity expansion has put short-term pressure on earnings performance, the long-term strategic advantages are very compelling,” said Azran Osman-Rani, CEO of AirAsia X.
On the back of its strategy of capacity and network expansion to strengthen its market leadership, AirAsia recorded H1 revenue growth of 38.6% y-o-y to MYR1.42 billion (US$447 million).
The capacity expansion into new cities in its core markets, such as Nagoya, Xian, and Chongqing, as well as additional frequencies to cities such as Sydney, Melbourne, Taipei, Seoul, and Tokyo have increased its Fly-Thru connectivity and attracted new passenger traffic.
High growth rates in passenger traffic, coupled with 53.3% y-o-y growth in Revenue-Passenger-Kilometres (RPK) to 10.38 billion, achieved H1 load factors hit 83.6%.
Due to capacity expansion however, Revenue-per-Available-Seat-Kilometre (RASK) yields have declined this year from 2013, dropping 7% y-o-y to 10.79 sen in Q2 – below Cost-per-Available-Seat-Kilometre (CASK) of 12.69 sen.
Meanwhile, overall operating expenses increased 61.5% y-o-y from MYR986.3 million to MYR1,593.1 million in 1H14. As a result, the carrier recorded a Loss After Tax of MYR140.1 million for H1.
RASK performance has been steadily improving from -15.1% in 4Q13 however, and based on forward sales to-date, the airline expects RASK to resume positive growth in the second-half of this year, as the capacity expansion last year matures and the rate of capacity growth progressively slows down.
“As we approach the end of the year after twelve months since we added a lot of new capacity in 4Q13, we expect RASK yields to return to positive growth and reach the levels recorded before the expansion,” said Mr. Osman-Rani.
“This in turn will return us back to profitability, particularly as global fuel prices are expected to soften, while Asian currencies are expected to stabilise.”
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