Skift Take

While AirAsia X is looking closely to contain costs, the airline's greatest learning from Covid has been to maintain a cash buffer for financial resilience and long-term sustainability, providing a safety net to weather uncertainties.

Capital A’s long-haul budget carrier AirAsia X reported its return to black with a net profit of $71 million and a revenue of $119 million in the first quarter of 2023.  

The shareholders’ equity for the airline has also demonstrated a positive turnaround to $9 million, from a negative of $62 million in the preceding quarter. A positive development for the airline that’s due to file its regularization plan.

In April, the airline had requested stock exchange Bursa Malaysia for an additional three months to file its regularization plan.

Speaking to Skift earlier this year, Tony Fernandes, CEO of AirAsia parent company Capital A, had said this year AirAsia X expects to exit the Practice Note 17 (PN17) status, which classifies it as a financially-distressed firm.

Last year, Capital A had also submitted plans for a corporate restructuring, to pull all its airlines under one existing structure as Fernandes stepped down as the acting group CEO of AirAsia X.

Recently, the company announced a proposed placement of shares with key institutional investors, potentially raising up to $11 million of new capital to bolster its short-term working capital requirements.

“This would help to strengthen the balance sheet as the company continues to recover and grow its operations in this post-pandemic era, primarily for the reactivation and maintenance of its growing fleet,” Ismail had said.

Fleet Reactivation Strategy

The airline’s fleet reactivation strategy also remains on track to support the ramp up of flight frequencies, CEO Benyamin Bin Ismail said during an earnings call on Monday.

Having activated two more aircraft in the first quarter, the airline currently has 17 aircraft in its fleet of which 11 are operational, even as six are in line to commence operations.

The airline is currently servicing or awaiting service for three out of the six aircraft. Additionally, the remaining three planes are awaiting the Civil Aviation Authority of Malaysia’s approval to be inducted into business.

“We are taking additional aircraft as we speak on a yearly basis and will be looking at growing that number over the next few years to go back to 24,” Ismail said.

Targeting to bring 330neos in 2026, AirAsia X also said that it is in negotiations with Airbus to accelerate some of the order books forward.

“We also remain careful that maintenance, repair, and operations slots and activation capabilities is tough,” said the AirAsia X CEO.

Calling parent company Capital A’s engineering arm — Asia Digital Engineering (ADE) — the goldmine of the group, Ismail said that with ADE coming into the business, the airline hopes to start maintenance, repair, and operations of 330s by next year.

The airline also hopes to reach its maximum capacity recovery probably by the end of next year.

Cash Position to Ensure Sufficient Buffer

While cost containment remains AirAsia X’s highest priority, Ismail said it is essential for the airline to make sure that its cash remains strong and the balance sheet remains solid.

‘We monitor the cash position quite rigorously to ensure a substantial buffer is maintained during downtimes, whether it be currency or fuel-related. Our goal is to ensure we have an ample buffer to proceed,” Ismail said.

The airline’s cash balance stood at $42 million at the end of March 2023.

To cater to the strong demand for international travel, AirAsia X recommenced flights to Osaka, Busan and Shanghai, on top of increasing its services to fly seven times weekly to Tokyo.

With the reopening of China, the airline is optimistic about the upcoming opportunities to launch more flights into the country, which has always been one of the airline’s strongest markets.

Ancillary Revenue Business

The airline’s ancillary revenue surged to $27 million or revenue per passenger of $53, an increase of over 40 percent from the first quarter of 2019, driven by bigger take-ups in baggage, inflight meals and, Fly-Thru connections.

With Fly-Thru, AirAsia allows customers taking two different flights or stopping over at a transit station to transfer from one flight to another without having to go through immigration or collecting one’s baggage to check it in for the next flight.

In comparison to the preceding quarter, the number of Fly-Thru passengers surged over 146 percent to 130,033 passengers in the first quarter of 2023.

Baggage fees has increased, especially on the take-ups, Ismail said, adding that the airline now provides an option to buy 60 kilograms, and the take-up of that has been “great.”

The hot seats and upgrades have also done well for the airline. “The hot seats have shown quite an improvement in our take ups. Inflight meals and beverage have also shown good improvement” the CEO said.

While duty free and merchandise has not picked up as yet Ismail said this was largely due to stock shortage. “From June onwards, the duty free will be stocked up back to pre-pandemic levels and also our merchandise.”

Passenger Volume

The airline said that the steady climb in earnings came on the back of a surge in passenger volume, the ramp up of aircraft activation and a stronger fare environment in recent quarters.

In the first quarter, the total number of passengers carried increased to 504,476 passengers, driven by new year holidays and spring season travel demand.

Furthermore, the increase in seat capacity contributed to the growth, with seats reaching 630,069, while available seat kilometers surged to 2,899 million.

Delhi and Tokyo routes posted close to 90 percent passenger load factor for the airline even as the overall load factor remained strong at 80 percent.

Thai AirAsia X

AirAsia X Thailand posted a net profit of $20 million on the back of a hike of revenue of $77 million as the number of passengers increased in line with the ramp-up of operations in Bangkok

The Thai carrier’s seat capacity during the first quarter increased to 329,913 seats while available seat kilometers rose by 40 percent to 1,601 million on the back of increased scheduled flights and frequencies.

The airline also recently announced the recommencement of its Bangkok-Shanghai route, marking its return to China.

AirAsia X currently services 16 destinations with up to 83 flights weekly. In the coming quarters, the team will further ramp up flight frequencies and is looking to launch more destinations to China while reviewing new services to Istanbul and potentially Central Asia, Ismail said.

“Our key priority is to ensure that more aircraft are activated within the stipulated timeline with all safety requirements fulfilled. We have been actively engaging with third-party aircraft lessors for the induction of additional aircraft to join AirAsia X’s growing fleet,” he said.


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Tags: airasia, AirAsia X, airline earnings, ancillary revenue, asia monthly, capital a, coronavirus recovery, earnings, malaysia, tony fernandes

Photo credit: AirAsia X reported a net profit of $71 million in the first quarter of 2023. saku_y / Flickr

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