5.airasia-27feb2014-massive hit from yield pressure-77503.1.0
DESCRIPTION
AirAsiaTRANSCRIPT
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AirlinesMalaysia
February 27, 2014
IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA
Massive hit from yield pressure AirAsias 4Q13 core net profit of RM96.8m was 60% below our forecast due to an unexpectedly large 19% yoy drop in quarterly yield, causing its full-year core earnings to fall 24% short of our forecast. Also contributing to the shortfall were the lower-than-expected profit of Thai AirAsia and higher-than-forecast losses of Indonesia AirAsia. Thus, we more than halve our FY14-15 EPS and cut our target price to liquidation value (from 11x CY15 P/E), the bare minimum AirAsia should trade at, in our view. We keep our Hold call although the share price could come under pressure as long-term downside is limited.
Highlights of 4Q13 For the first time in memory, Malaysia AirAsias (MAA) 4Q profit was essentially flat qoq, despite the seasonal peak. 4Q13 core net profit was down 42% yoy despite an 11% rise in ASK capacity, as RASK fell 17% yoy to 14.36 sen on the back of weak pricing. The last time 4Q RASK was lower than this was in 4Q09, when jet fuel was 40% cheaper.
Airline industry suffering from self-inflicted injuries AirAsias poor results were not out of line with the shockingly weak results just announced by MAS and AirAsia X. The consolation is that the group is still profitable compared to the many other airlines hat are swimming in red ink. For this reason, we think that the possible share price downside will not be severe, as AirAsia is already trading below its liquidation value.
Is there hope? MAS and AirAsia have guided that domestic and intra-ASEAN fares are unlikely to decline further from the already-low levels, but we think that fares are unlikely to rise either, as capacity deployment over the next six months will be kept at present levels and there is no evidence of capacity rationalisation. As the weak 4Q13 fares carry over into 2014, we still expect MAA to experience an average 5% underlying yield compression in 2014, leading to a 26% core net profit decline. To make things worse, Thai AirAsias profit is likely to shrink and Indonesia AirAsias losses expand further this year. Thus, we expect AirAsias group core net profit to fall a massive 43% yoy in 2014. The outlook may improve in 2015-16 as the losses are unsustainable for MAS and Malindo.
CIMB Analyst(s)
Raymond YAP, CFA T (60) 3 2261 9072 E [email protected]
GAN Jian Bo T (60) 3 2261 9082 E [email protected]
Share price info
Share price perf. (%) 1M 3M 12M
Relative 0.6 -2.2 -22.1
Absolute 1.7 -0.8 -9.9
Major shareholders % held
Tune Air 23.1
EPF 10.9
AirAsia Bhd 4QFY13 RESULTS NOTE AIRA MK / AIRA.KL Current RM2.38
Market Cap Avg Daily Turnover Free Float Target RM2.40
US$2,024m US$5.58m 66.0% Prev. Target RM2.55 RM6,619m RM18.33m 2,778 m shares Up/Downside 0.8%
Conviction| |
Sources: CIMB. COMPANY REPORTS
Results comparison - note that core net profit includes share of airline associate profits/losses
FYE Dec (RM m) 4QFY13 4QFY12 yoy % qoq % 4QFY13 4QFY12 yoy % Prev.
chg chg Cum Cum chg FY13F Comments
Revenue 1,354.0 1,408.4 (3.9) 5.8 5,181.3 4,995.9 3.7 5,349.6 4Q13 revenue dipped 3.9% yoy as a sharp deterioration in passenger
Operating costs (954.8) (853.5) 11.9 7.1 (3,645.1) (3,333.1) 9.4 3,648.2 yields more than offset higher capacity and loads.
EBITDA 399.2 554.9 (28.1) 2.7 1,536.3 1,662.7 (7.6) 1,701.5 Opex grew in tandem with capacity growth, led by increases in fuel and
EBITDA margin (%) 29.5 39.4 29.7 33.3 (10.9) 31.8 asset-related costs. As a result, EBITDA fell by 28% yoy.
Depn & amort. (160.5) (149.0) 7.7 (2.7) (634.5) (562.2) 12.9 (667.4) Higher depreciation and interest expense due to additional aircraft. MAA
EBIT 238.7 405.9 (41.2) 6.7 901.8 1,100.5 (18.1) 1,034.1 currently operates 72 A320s.
Interest expense (110.3) (97.2) 13.5 3.7 (432.4) (378.8) 14.1 (459.8)
Interest & invt inc 13.7 20.9 (34.5) (16.4) 68.8 79.4 (13.4) 74.5
Associates' contrib 28.7 19.5 47.2 20.1 61.7 (3.8) 1,724.6 79.8 Below due to weaker-than-expected profits from Thai AirAsia.
Exceptionals 2.7 13.6 (80.1) 102.0 (156.8) 1,254.0 (112.5) (44.9) RM40m unrealised forex losses due to the weaker ringgit, offset by a
Pretax profit 173.5 362.8 (52.2) 591.0 443.1 2,051.3 (78.4) 683.8 RM27m derivative gain and a RM9m asset disposal gain.
Tax 71.8 (12.1) 693.0 592.7 0.9 (175.5) 100.5 (13.7) AirAsia enjoyed deferred tax benefits of RM77m in 4Q13. Cash taxes,
Tax rate (%) (41.4) 3.3 (0.2) 8.6 2.0 meanwhile, amounted to RM5.2m.
Minority interests - - nm nm - - nm -
Net profit 245.4 350.6 (30.0) 591.5 444.0 1,875.8 (76.3) 670.0 Below. Core net profit in 2013 represented only 76% of our FY13 forecast
Core net profit 96.8 349.2 (72.3) (33.5) 473.2 797.5 (40.7) 625.1 due to significantly poorer yields and weaker than expected showing for
EPS (sen) 8.8 12.6 (30.1) 591.2 16.0 67.5 (76.3) 24.1 its associates in Thailand and Indonesia.
Core EPS (sen) 3.5 12.6 (72.3) (33.5) 17.0 28.7 (40.7) 22.5
SOURCE: CIMB, COMPANY REPORTS
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AirlinesAirAsia Bhd
February 27, 2014
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Results and conference call highlights
AirAsias FY13 results conference call was hosted by Tan Sri Tony Fernandes (Group CEO). Apart from the surprisingly poor 4Q13 results, the key highlight from the call was the capacity management that AirAsia intends to put in place to mitigate the excess capacity in ASEAN right now.
Figure 1: Core net profit - AirAsia group
2011 2012 2013 2014F 2015F 2016F
Attributable profit 564.1 1,875.8 444.0 756.2 514.4 651.5
Remove: Associates -6.3 3.8 -61.7 -50.8 16.6 -20.8
Remove: Exceptionals -50.0 -1,254.0 156.8 -175.3 -108.4 -108.4
+/- Tax effect on excep 0.0 0.0 0.0 0.0 0.0 0.0
+ Deferred tax provisions 211.6 156.7 -19.8 -145.7 53.1 86.7
Malaysia core net profit 719.4 782.2 519.3 384.4 475.7 609.0
+ Share of Thai AA (45%) 102.1 85.1 85.8 59.8 91.4 117.8
+ Share of Indo AA (49%) 19.9 22.8 -49.5 -112.5 -111.4 -109.1
+ Share of AA Phiippines (40%) -5.7 -34.2 -36.0 -50.0 -40.0 -40.0
+ Share of AA Japan (49%) 0.0 -50.2 -59.5 0.0 -60.0 -70.0
+ Share of AA India (49%) 0.0 0.0 0.0 -30.0 -70.0 -50.0
+ Share of AACOE (50%) 7.2 9.0 8.9 11.0 12.0 13.0
+ Share of Expedia (50%) 4.8 -11.8 8.1 10.0 10.0 10.0
+ Share of BIG (50%) -4.5 -5.4 -3.8 -5.0 -5.0 -5.0
Group core net profit 843.3 797.5 473.2 267.6 302.7 475.7 SOURCES: CIMB, COMPANY REPORTS
Capacity management tools. AirAsia will achieve this goal by: (1) renegotiating the timing of Airbus deliveries, (2) selling older aircraft to third-party buyers, and/or (3) set up a leasing company to place out the excess aircraft in the AirAsia group fleet to third-party lessees.
More details as follows:
1. AirAsia has agreed with Airbus to defer seven A320 deliveries in 2014 and 12 deliveries in 2015. These 19 A320 classic orders will be replaced by A320neos that will be delivered from 2018 onwards.
Figure 2: Aircraft delivery schedule and deferrals
2014 2015 2016
New A320 deliveries from Airbus - original schedule 31 29 18
Less: Deferred deliveries -7 -12
Net deliveries 24 17
Of which is allocated to:
- Malaysia 14
- Thailand 8
- Indonesia nil
- Philippines nil
- India 2 SOURCES: CIMB, COMPANY REPORTS
Financial Summary
Dec-12A Dec-13A Dec-14F Dec-15F Dec-16F
Revenue (RMm) 4,996 5,181 5,608 6,047 6,574
Operating EBITDA (RMm) 1,663 1,536 1,587 1,788 2,019
Net Profit (RMm) 1,876 444 756 514 652
Core EPS (RM) 0.29 0.17 0.10 0.11 0.17
Core EPS Growth (5.4%) (40.7%) (43.5%) 13.1% 57.2%
FD Core P/E (x) 8.29 13.98 24.73 21.87 13.91
DPS (RM) 0.24 0.06 0.06 0.05 0.05
Dividend Yield 10.1% 2.5% 2.3% 2.2% 2.1%
EV/EBITDA (x) 7.72 9.79 9.70 8.68 7.69
P/FCFE (x) 280.7 NA 9.0 8.3 6.7
Net Gearing 116% 168% 157% 149% 138%
P/BV (x) 1.24 1.32 1.18 1.11 1.02
ROE 17.0% 9.1% 5.0% 5.2% 7.7%
% Change In Core EPS Estimates (55.3%) (53.1%)
CIMB/consensus EPS (x) 0.93 0.55
56.0
74.8
93.5
112.3
2.00
2.50
3.00
3.50
Price Close Relative to FBMKLCI (RHS)
Source: Bloomberg
10
20
30
40
50
Feb-13 May-13 Aug-13 Dec-13
Vo
l m
2.38
2.40
2.20 3.48
Target
52-week share price range
Current
SOURCE: CIMB, COMPANY REPORTS
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AirlinesAirAsia Bhd
February 27, 2014
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2. These deferrals are required because of the closure of AirAsia Japan (AAJ) in mid-2013 and because Indonesia AirAsia (IAA) and AirAsia Philippines (AAP) are doing poorly and cannot accommodate any additional capacity.
3. Malaysia AirAsia (MAA) will sell six older planes from its fleet in 2014, which could realise up to US$120m in proceeds. These are 9 to 10-year-old planes, which are worth about US$20m each right now. No further sales are planned at the moment.
4. AirAsia is planning to set up a leasing company that could potentially buy used aircraft from MAA, and lease it out to third-party lessees. This is one way that AirAsia can manage its overall capacity deployment. The idea is still preliminary but could take shape at a later date.
In our view, these capacity management measures will help the AirAsia group in the medium-to-long term but they will not be powerful enough to offset the impact of weak yields in the immediate future.
Dividends and share buybacks. AirAsia reiterated that its dividend policy is still 20% of core operating profit and an announcement on the final dividend for FY13 will be made at a later date. The Board of Directors has approved a share buyback of up to 10% of the outstanding shares.
Associates
AirAsia Japan. AAJ is expected to be relaunched in February 2015 with new partners. If AAJ and AirAsia India (AAI), which could start operations in 2014, do well, AirAsia may negotiate with Airbus to accelerate deliveries in 2015. However, there is no such plan at the moment, as AirAsia prefers to remain conservative on the prospects for AAJ and AAI. We have pencilled in RM60m-70m in share of annual losses from AAJ in FY15-16.
AirAsia India. AAI will be allocated two new deliveries in 2014 and four older planes will be transferred from MAA. It is expected to end 2014 with a fleet of six A320s. We have included RM30m-70m in share of annual losses from AAI in our FY14-16 forecasts.
Thai AirAsia. TAA has seen pressure on its load factors and yields during 4Q13 as a result of the political protests. However, it is still sticking to its plan to take eight new A320 deliveries in 2014 and six more planes in 2015. TAAs 4Q13 RASK fell 9.6% yoy, leading to a 43% yoy decline in baht net profit and a 46% yoy contraction in quarterly contribution to AirAsia.
Indonesia AirAsia. IAA is doing poorly and posted a significant loss in 4Q13 of Rp429bn, compared with a profit of Rp124bn in 4Q12, due to the upward cost pressures from the 23% yoy appreciation of the US$ and 7% drop in RASK from the weak consumer sentiment. IAA will not expand its fleet in 2014. The listing of IAA will be shelved indefinitely.
AirAsia Philippines. AAP will also not take any new aircraft in 2014 as it is still struggling to absorb the capacity of Zest Air (now renamed AirAsia Zest) and navigate the low fares in the Philippines. AAP and AAZ do not appear to have pricing power, with fares typically at a discount to market leader Cebu Air. AAP contributed a loss of RM10m to AirAsia in 4Q13, attributable to the latters 40% stake.
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AirlinesAirAsia Bhd
February 27, 2014
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Malaysia AirAsia
Poor earnings performance. MAAs full-year core net profit fell 34% yoy to RM519m in 2013 due to yield pressures arising from Malindos entry into the Malaysian market in late-March 2013 and MASs aggressive capacity and price response to that competition.
MAAs core net profit for each of 2013s four quarters fell below that of 2012 but the pace of decline worsened substantially as the year progressed; from -2% in 1Q13 to -22%/-25% yoy in 2Q/3Q13, and finally to -58% yoy in 4Q13. This corresponds to the yield environment as it worsened throughout 2013.
Figure 3: Malaysia AirAsia
1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13
MAA's core net profit (RM m) 157.3 130.3 168.2 326.5 154.2 97.6 130.6 136.9
Yoy change (%) -1.9% -25.1% -22.3% -58.1%
MAA's yield (sen/RPK) 18.82 18.67 20.00 20.91 19.20 17.22 18.05 16.97
- Underlying fare 15.38 15.47 16.55 17.34 15.58 13.83 14.53 13.57
- Ancillary income 3.45 3.20 3.44 3.57 3.62 3.40 3.52 3.41
Change in yield (%) 2.0% -7.8% -9.7% -18.8%
- Underlying fare 1.3% -10.6% -12.2% -21.7%
- Ancillary income 5.1% 6.1% 2.3% -4.6% SOURCES: CIMB, COMPANY REPORTS
Fleet expansion to be reduced in 2014. MAA will reduce its fleet expansion in 2014 to a net of four planes, down from the 8-plane addition in 2013.
Figure 4: Aircraft movement for Malaysia AirAsia
2013 2014
Number of A320s as at 1 January 64 72 a
Add: New A320s delivered from Airbus 10 14
Add: Transfer from AA Japan (2013) 1 nil
Less: Transfer to AA Philippines (2013) -3 nil
Less: Sold to third-parties (2014) -6
Less: Transfer to AA India (2014) -4
Number of A320s as at 31 December 72 76 b
Net aircraft addition 8 4 c = b - a SOURCES: CIMB, COMPANY REPORTS
Cost-saving initiatives. AirAsia is embarking on a cost-reduction exercise that will involve the regional consolidation of back office functions such as accounting, human resources, IT and procurement. It will also seek to merge the AirAsia and AirAsia X counter check-in staff and baggage handling staff at the LCCT, as well as encourage automation such as self-service kiosks at the airport.
AirAsia also briefly mentioned that it targets to: (1) improve flight operations to save on fuel and non-fuel costs, (2) renegotiate engineering contracts, and (3) reduce marketing spend. It also plans to rationalise certain non-performing routes and reallocate capacity to better-performing routes, as well as close the AirAsia ASEAN office in Jakarta.
AirAsia claimed to have achieved 2% non-fuel cost savings in 4Q13 and targets to cut another 4% in 2014.
Some of the savings will also come from the ongoing fleet renewal at MAA, which has transferred three older aircraft to AAP in 2013. Although MAA will only expand its fleet by a net of four A320s in 2014, it will actually be taking delivery of 14 new planes, which will be partially offset by the sale/transfer of 10
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AirlinesAirAsia Bhd
February 27, 2014
5
older aircraft. In this way, MAA will be able to benefit from the better fuel economies of the newer planes and reduced maintenance costs.
Revenue enhancement initiatives. AirAsia is pushing to increase the take-up rate of Fly-Thru connectivity with AAX from 25% in 2013 to 35% in 2014. AirAsia hopes to achieve this by working with its online travel agents (OTA) and global distribution system (GDS) partners to make all possible route pairs visible on the OTA/GDS systems. At the moment, only point-to-point services are visible.
Expedia currently contributes 2.5% of all seats sold and AirAsia will need to renegotiate Expedias right to exclusive online distribution of AirAsia tickets if it hopes to work with other OTAs. Placing AirAsias seat inventory on GDS is not cheap, at a cost of US$9.50/passenger/sector. However, AirAsia is looking to GDS and OTA distribution to fill up the 15-20% of seats that are on average left empty.
AirAsia is also hoping to push its High-Flyer product more aggressively to corporates in order to lift average yields.
AirAsia targets to lift its ancillary income per passenger to RM47/pax by end-2014 from RM40/pax in 4Q13 by increasing the take-up rates of existing ancillary products and services, introducing on-board WiFi that will be rolled-out gradually in 2014, and commencing the retail of duty free products sometime this year.
Our view is that RM47/pax is a tall target for AirAsia to achieve this year in light of the excess capacity and low fares in the system, which tend to attract the marginal, cost-conscious traveller who will not spend much on ancillary products and services. Furthermore, the take-up and penetration rates for existing ancillaries appear to have maxed out already, as indicated by the ancillary income per passenger remaining flat at around RM40-44/pax for the past four consecutive years. To break through the ceiling, AirAsia will have to introduce online and onboard retail of duty free products in a big way. However, we think that AirAsia is not ready yet and it will not be until 2015 or 2016, when the duty-free business could make a big splash, if at all.
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AirlinesAirAsia Bhd
February 27, 2014
6
Assumption changes
We have cut our ASK and RPK assumptions for FY14-15 slightly, as MAA is expanding at a slower-than-expected pace, but keep our PLF assumption at 80%. Although we cut our effective jet fuel price, we are now factoring in an average exchange rate of RM3.30:US$1 from RM3.15. Finally, the key assumption change is the reduction in yield, which is the single largest contributor to our lower earnings forecasts.
We have also lowered our yield forecasts and used weaker exchange rates for TAA and IAA. As a result, we expect lower earnings contribution from TAA and losses from IAA.
Figure 5: Assumption changes - Malaysia AirAsia
ASK (m km) Current Previous Chg (%)
2014F 35,144 36,071 -2.6%
2015F 37,044 38,492 -3.8%
RPK (m km) Current Previous Chg (%)
2014F 28,115 28,857 -2.6%
2015F 29,635 30,794 -3.8%
PLF (%) Current Previous Chg (% pts)
2014F 80.0% 80.0% 0.0%
2015F 80.0% 80.0% 0.0%
Yield (sen/RPK) Current Previous Chg (%)
2014F 17.18 18.36 -6.5%
2015F 17.52 18.14 -3.4%
Effective jet price (US$/bbl) Current Previous Chg (%)
2014F 127.0 130.0 -2.3%
2015F 127.0 130.0 -2.3% SOURCES: CIMB, COMPANY REPORTS
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AirlinesAirAsia Bhd
February 27, 2014
7
Figure 6: Key assumptions - Malaysia AirAsia
2006 2007 2008 2009 2010 2011 2012 2013 2014F 2015F 2016F
ASK (m km) 10,457 14,536 18,716 22,039 24,362 26,075 28,379 31,582 35,144 37,044 39,893
Change in ASK (%) 39.1% 39.0% 28.8% 17.8% 10.5% 7.0% 8.8% 11.3% 11.3% 5.4% 7.7%
RPK (m km) 8,427 11,421 14,144 16,522 19,019 21,037 22,731 25,333 28,115 29,635 31,914
Change in RPK (%) 52.6% 35.5% 23.8% 16.8% 15.1% 10.6% 8.1% 11.4% 11.0% 5.4% 7.7%
Pax Load Factor 80.6% 78.6% 75.6% 75.0% 78.1% 80.7% 80.1% 80.2% 80.0% 80.0% 80.0%
Pax Yield (sen/RPK) 15.72 16.84 18.67 17.02 18.64 18.68 19.63 17.82 17.18 17.52 17.73
- Seats and surcharges 14.67 15.65 17.01 14.51 14.93 15.10 16.21 14.34 13.62 13.90 14.03
- Ancillary 1.05 1.19 1.66 2.51 3.71 3.59 3.42 3.48 3.55 3.62 3.70
Change in yield (%) 1.1% 7.1% 10.9% -8.8% 9.5% 0.2% 5.0% -9.2% -3.6% 2.0% 1.2%
- Seats and surcharges 0.2% 6.7% 8.7% -14.7% 2.9% 1.1% 7.3% -11.5% -5.0% 2.0% 1.0%
- Ancillary 15.6% 12.9% 39.8% 51.4% 47.6% -3.3% -4.7% 1.9% 2.0% 2.0% 2.0%
Pax RASK (sen/ASK) 12.67 13.23 14.11 12.76 14.55 15.07 15.72 14.30 13.74 14.02 14.18
- Seats and surcharges 11.82 12.29 12.85 10.88 11.66 12.18 12.98 11.50 10.90 11.12 11.23
- Ancillary 0.85 0.93 1.25 1.88 2.90 2.89 2.74 2.79 2.84 2.90 2.96
Change in RASK (%) 10.8% 4.4% 6.7% -9.5% 14.1% 3.6% 4.3% -9.1% -3.9% 2.0% 1.2%
- Seats and surcharges 9.8% 4.0% 4.5% -15.4% 7.2% 4.5% 6.6% -11.4% -5.3% 2.0% 1.0%
- Ancillary 26.7% 10.1% 34.4% 50.2% 53.8% -0.1% -5.4% 2.1% 1.7% 2.0% 2.0%
Fuel price (US$/barrel)
Spot jet fuel price 80.5 86.8 125.3 67.8 88.3 123.8 126.8 122.8 125.0 125.0 125.0
Effective jet fuel price 77.6 86.8 129.4 70.3 91.9 131.0 134.0 130.3 127.0 127.0 127.0
Barrels consumed (m) 2.06 2.64 3.25 3.78 4.11 4.29 4.65 5.16 5.75 6.06 6.54
Unit cost (sen/ASK) 11.71 12.39 14.10 11.02 11.40 12.65 13.18 12.81 12.79 12.87 12.79
- Fuel 5.53 5.43 7.43 4.23 4.98 6.58 6.86 6.75 6.85 6.85 6.87
- Non-fuel 3.90 4.15 4.51 4.32 4.30 4.03 4.32 4.19 4.06 4.14 4.08
- Asset cost 2.27 2.81 2.16 2.47 2.12 2.04 1.99 1.87 1.88 1.87 1.84
Change in unit cost (%) 15.7% 5.8% 13.8% -21.8% 3.4% 11.0% 4.1% -2.8% -0.2% 0.6% -0.6%
- Fuel 15.8% -1.8% 36.8% -43.1% 17.8% 31.9% 4.4% -1.6% 1.5% 0.0% 0.2%
- Non-fuel -1.2% 6.3% 8.7% -4.1% -0.6% -6.1% 7.1% -3.0% -3.1% 2.1% -1.4%
- Asset cost 63.1% 23.7% -23.3% 14.4% -14.1% -3.7% -2.5% -6.3% 0.5% -0.1% -1.8%
Group No of Aircraft 49 65 72 84 90 98 118 154 167 178 196
- Malaysia 31 39 44 48 53 57 64 72 76 80 88
* A320 15 31 44 48 53 57 64 72 76 80 84
* B737 16 8 0 0 0 0 0 0 0 0 0
- Thailand 12 15 16 20 19 22 27 35 43 49 55
* A320 0 2 7 12 19 22 27 35 43 49 55
* B737 12 13 9 8 0 0 0 0 0 0 0
- Indonesia 6 11 12 16 18 17 22 30 30 32 34
* A320 0 0 5 10 14 17 22 30 30 32 34
* B737 6 11 7 6 4 0 0 0 0 0 0
- Philippines A320 0 0 0 0 0 1 2 17 12 6 6
- Japan A320 0 0 0 0 0 1 3 0 0 2 2
- India A320 0 0 0 0 0 0 0 0 6 9 11 SOURCES: CIMB, COMPANY REPORTS
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AirlinesAirAsia Bhd
February 27, 2014
8
Domestic capacity industry-wide analysis
The capacity in the top six domestic routes in Malaysia jumped 18% in 1H13 because of the entry of Malindo, which caused the incumbents to react to the competitive threat by adding more capacity themselves. Over the past year (January 2014 vs. January 2013), capacity for the top six domestic routes has increased 22.3% and this capacity is expected to remain flat over the next six months to July 2014.
Capacity on the key trunk routes of KL-Kota Kinabalu/Kuching will remain flat over the next six months and only single-digit capacity reductions will be seen for the KL-Penang/Langkawi (due to the lower AirAsia capacity and the withdrawal of Berjaya Air). KL-Kota Bahru, on the other hand, will see capacity rise 6.6% over the next six months as AirAsia increases its frequencies.
Due to the absence of significant capacity rationalisation in the Malaysian domestic market, the present low domestic fares will, at best, recover gradually. AirAsia did note that there were slight improvements in domestic fares in early-2014 but MAS has indicated that fares will remain low this year.
Unless the airlines domestic capacity is reduced in 2H14, we are not optimistic that there will be any sustainable or material improvement in average domestic ticket prices this year.
Figure 7: Domestic capacity ex-KUL/SZB (top six domestic routes)
Jan-12 Jan-13 Jul-13 Jan-14 Jul-14
Flights from KUL/SZB to
Total seat
capacity/week
Total seat
capacity/week
Total seat
capacity/week
Total seat
capacity/week
Total seat
capacity/week
Past 1 year Next 6
months
Kota Kinabalu 26,220 30,139 35,310 34,264 34,448 13.7% 0.5%
Kuching 22,830 24,896 33,708 31,320 31,500 25.8% 0.6%
Penang 26,642 27,648 30,798 33,840 31,704 22.4% -6.3%
Langkawi 19,059 19,888 21,978 26,720 24,840 34.4% -7.0%
Kota Bahru 17,092 17,600 19,353 20,212 21,536 14.8% 6.6%
Miri 8,295 8,240 10,689 10,648 10,748 29.2% 0.9%
Total 120,138 128,411 151,836 157,004 154,776 22.3% -1.4%
BREAKDOWN BY AIRLINE
Jan-12 Jan-13 Jul-13 Jan-14 Jul-14
Total seat
capacity/week
Total seat
capacity/week
Total seat
capacity/week
Total seat
capacity/week
Total seat
capacity/week
Past 1 year Next 6
months
MAS 40,710 45,827 50,556 50,624 53,508 10.5% 5.7%
AirAsia 68,940 68,760 76,860 76,860 74,340 11.8% -3.3%
Firefly 10,296 10,296 10,728 10,872 11,016 5.6% 1.3%
Malindo 0 0 10,836 15,912 15,912 0.0%
Berjaya Air 192 3,528 2,856 2,736 - -22.4% -100.0%
Total 120,138 128,411 151,836 157,004 154,776 22.3% -1.4%
Growth in industry seats
Growth in seat capacity
SOURCES: CIMB, OAG, CAPA
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AirlinesAirAsia Bhd
February 27, 2014
9
Figure 8: Capacity analysis Domestic (top six routes)
No of seats Market share No of seats Market share No of seats Market share No of seats Market share Past 1 year Next 6 months
Kota Kinabalu
MAS 12,499 41.5% 12,630 35.8% 11,584 33.8% 11,768 34.2% -7.3% 1.6%
AirAsia 17,640 58.5% 18,900 53.5% 17,640 51.5% 17,640 51.2% 0.0% 0.0%
Malindo - 0.0% 3,780 10.7% 5,040 14.7% 5,040 14.6% 0.0%
Total 30,139 100.0% 35,310 100.0% 34,264 100.0% 34,448 100.0% 13.7% 0.5%
No of seats Market share No of seats Market share No of seats Market share No of seats Market share Past 1 year Next 6 months
Kuching
MAS 9,056 36.4% 11,028 32.7% 11,160 35.6% 11,340 36.0% 23.2% 1.6%
AirAsia 15,840 63.6% 18,900 56.1% 17,640 56.3% 17,640 56.0% 11.4% 0.0%
Malindo - 0.0% 3,780 11.2% 2,520 8.0% 2,520 8.0% 0.0%
Total 24,896 100.0% 33,708 100.0% 31,320 100.0% 31,500 100.0% 25.8% 0.6%
No of seats Market share No of seats Market share No of seats Market share No of seats Market share Past 1 year Next 6 months
Penang
MAS 10,224 37.0% 10,170 33.0% 10,512 31.1% 10,932 34.5% 2.8% 4.0%
AirAsia 10,080 36.5% 11,340 36.8% 12,600 37.2% 11,340 35.8% 25.0% -10.0%
Firefly 5,184 18.8% 5,760 18.7% 5,256 15.5% 5,400 17.0% 1.4% 2.7%
Malindo - 0.0% 1,008 3.3% 4,032 11.9% 4,032 12.7% 0.0%
Berjaya Air 2,160 7.8% 2,520 8.2% 1,440 4.3% - 0.0% -33.3% -100.0%
Total 27,648 100.0% 30,798 100.0% 33,840 100.0% 31,704 100.0% 22.4% -6.3%
No of seats Market share No of seats Market share No of seats Market share No of seats Market share Past 1 year Next 6 months
Langkawi
MAS 6,208 31.2% 7,602 34.6% 7,496 28.1% 8,964 36.1% 20.7% 19.6%
AirAsia 11,880 59.7% 12,600 57.3% 15,660 58.6% 12,600 50.7% 31.8% -19.5%
Firefly 1,440 7.2% 1,440 6.6% 1,512 5.7% 1,512 6.1% 5.0% 0.0%
Malindo - 0.0% - 0.0% 1,764 6.6% 1,764 7.1% 0.0%
Berjaya Air 360 1.8% 336 1.5% 288 1.1% - 0.0% -20.0% -100.0%
Total 19,888 100.0% 21,978 100.0% 26,720 100.0% 24,840 100.0% 34.4% -7.0%
No of seats Market share No of seats Market share No of seats Market share No of seats Market share Past 1 year Next 6 months
Kota Bahru
MAS 4,640 26.4% 4,737 24.5% 4,804 23.8% 5,336 24.8% 3.5% 11.1%
AirAsia 8,280 47.0% 10,080 52.1% 8,280 41.0% 10,080 46.8% 0.0% 21.7%
Firefly 3,672 20.9% 3,528 18.2% 4,104 20.3% 4,104 19.1% 11.8% 0.0%
Malindo - 0.0% 1,008 5.2% 2,016 10.0% 2,016 9.4% 0.0%
Berjaya Air 1,008 5.7% - 0.0% 1,008 5.0% - 0.0% 0.0% -100.0%
Total 17,600 100.0% 19,353 100.0% 20,212 100.0% 21,536 100.0% 14.8% 6.6%
No of seats Market share No of seats Market share No of seats Market share No of seats Market share Past 1 year Next 6 months
Miri
MAS 3,200 38.8% 4,389 41.1% 5,068 47.6% 5,168 48.1% 58.4% 2.0%
AirAsia 5,040 61.2% 5,040 47.2% 5,040 47.3% 5,040 46.9% 0.0% 0.0%
Malindo - 0.0% 1,260 11.8% 540 5.1% 540 5.0% 0.0%
Total 8,240 100.0% 10,689 100.0% 10,648 100.0% 10,748 100.0% 29.2% 0.9%
31 Dec 2012 - 6 Jan 2013 1-7 Jul 2013 30 Dec 2013 - 5 Jan 2014 21-27 Jul 2014 Increase (%)
31 Dec 2012 - 6 Jan 2013 1-7 Jul 2013 30 Dec 2013 - 5 Jan 2014 21-27 Jul 2014 Increase (%)
31 Dec 2012 - 6 Jan 2013 1-7 Jul 2013 30 Dec 2013 - 5 Jan 2014 21-27 Jul 2014 Increase (%)
31 Dec 2012 - 6 Jan 2013 1-7 Jul 2013 30 Dec 2013 - 5 Jan 2014 21-27 Jul 2014 Increase (%)
31 Dec 2012 - 6 Jan 2013 1-7 Jul 2013 30 Dec 2013 - 5 Jan 2014 21-27 Jul 2014 Increase (%)
31 Dec 2012 - 6 Jan 2013 1-7 Jul 2013 30 Dec 2013 - 5 Jan 2014 21-27 Jul 2014 Increase (%)
SOURCES: CIMB, OAG, CAPA
-
AirlinesAirAsia Bhd
February 27, 2014
10
Figure 9: Kuala Lumpur (KUL) to Kota Kinabalu capacity
SOURCE: OAG, CAPA
Figure 10: Kuala Lumpur (KUL) to Kuching capacity
SOURCE: OAG, CAPA
-
AirlinesAirAsia Bhd
February 27, 2014
11
Figure 11: Kuala Lumpur (KUL/SZB) to Penang capacity
SOURCE: OAG, CAPA
Figure 12: Kuala Lumpur (KUL/SZB) to Langkawi capacity
SOURCE: OAG, CAPA
-
AirlinesAirAsia Bhd
February 27, 2014
12
Figure 13: Kuala Lumpur (KUL/SZB) to Kota Bahru capacity
SOURCE: OAG, CAPA
Figure 14: Kuala Lumpur (KUL) to Miri capacity
SOURCE: OAG, CAPA
-
AirlinesAirAsia Bhd
February 27, 2014
13
ASEAN capacity industry-wide analysis
In the ASEAN space, we have seen fairly large capacity increases from KL to Indonesia (+32.6%) and Thailand (+15.7%) over the past year and this capacity is expected to rise by another 3% over the next six months. In the light of the reduced travel demand to Thailand because of the political protests and the reduction in travel demand from Indonesia because of the impact of the currency depreciation, we think that the carriers operating to Thailand and Indonesia from KL are feeling the heat of yield declines. Since the capacity to these two countries will be maintained over the next six months, yields are likely to remain low, in our view.
Singapore is the only country to see a reduction (-7.9%) in deployed seat capacity over the past six months, with all airlines cutting back on capacity except for MAS that increased its frequencies. Singapore is largely saturated with too many flights and the reduction in capacity is a step in the right direction. However, the capacity cutbacks are likely a reaction to poor yields and any subsequent yield improvement in Singapore is unlikely to offset the yield decline in Thailand and Indonesia, which combined, is almost 3x the size of the Singapore market.
Given that the KL to ASEAN capacity will remain largely unchanged over the next six months, we are not optimistic that there will be substantial opportunities for yield improvement in the ASEAN markets in 2014.
Figure 15: ASEAN capacity ex-KUL
Jan-12 Jan-13 Jul-13 Jan-14 Jul-14
Flights from KUL to
Total seat
capacity/week
Total seat
capacity/week
Total seat
capacity/week
Total seat
capacity/week
Total seat
capacity/week
Past 1 year Next 6
months
Thailand 37,067 41,287 47,000 47,785 49,155 15.7% 2.9%
Singapore 42,412 48,995 48,467 45,136 45,467 -7.9% 0.7%
Indonesia 61,343 63,993 78,377 84,873 87,342 32.6% 2.9%
Philippines 5,480 10,529 11,469 11,405 9,798 8.3% -14.1%
Myanmar 3,150 4,767 4,653 5,626 5,626 18.0% 0.0%
Vietnam 13,877 15,844 15,999 16,508 14,756 4.2% -10.6%
Cambodia 5,595 6,500 7,873 6,732 6,732 3.6% 0.0%
Total 168,924 191,915 213,838 218,065 218,876 13.6% 0.4%
BREAKDOWN BY AIRLINE
Jan-12 Jan-13 Jul-13 Jan-14 Jul-14
Total seat
capacity/week
Total seat
capacity/week
Total seat
capacity/week
Total seat
capacity/week
Total seat
capacity/week
Past 1 year Next 6
months
MAS 35,124 39,670 46,656 50,690 53,128 27.8% 4.8%
AirAsia 67,500 71,460 77,940 77,400 75,960 8.3% -1.9%
Thai AirAsia 3,780 3,600 3,780 5,040 5,040 40.0% 0.0%
Thai Airways 5,534 5,644 5,640 5,461 5,436 -3.2% -0.5%
Indonesia AirAsia 16,380 16,920 22,680 22,500 24,660 33.0% 9.6%
Lion Air 2,982 4,389 5,964 6,222 5,796 41.8% -6.8%
Garuda Indonesia 2,296 2,184 2,184 2,184 2,184 0.0% 0.0%
Singapore Airlines 4,845 4,845 4,845 3,420 4,845 -29.4% 41.7%
SilkAir 4,892 5,670 6,494 5,140 6,974 -9.3% 35.7%
Tiger Airways 4,500 5,400 5,040 5,040 5,040 -6.7% 0.0%
Jetstar Asia 4,500 9,180 8,100 8,820 6,300 -3.9% -28.6%
Zest Air 0 672 1,176 3,240 1,980 382.1% -38.9%
Cebu Pacific Air 1,980 2,806 2,806 2,506 2,506 -10.7% 0.0%
Myanmar International Airways 785 1,127 483 810 810 -28.1% 0.0%
Vietnam Airlines 3,612 3,864 3,864 3,864 3,864 0.0% 0.0%
Cambodia Angkor Air - - 1,288 - - nm nm
Others 10,214 14,484 14,898 15,728 14,353 8.6% -8.7%
Total 168,924 191,915 213,838 218,065 218,876 13.6% 0.4%
Growth in industry seats
Growth in seat capacity
SOURCES: CIMB, OAG, CAPA
-
AirlinesAirAsia Bhd
February 27, 2014
14
Figure 16: Capacity analysis - ASEAN
No of seats Market share No of seats Market share No of seats Market share No of seats Market share Past 1 year Next 6 months
Thailand
MAS 7,776 18.8% 9,960 21.2% 9,184 19.2% 12,136 24.7% 18.1% 32.1%
AirAsia 17,280 41.9% 19,260 41.0% 20,700 43.3% 20,700 42.1% 19.8% 0.0%
Thai AirAsia 3,600 8.7% 3,780 8.0% 5,040 10.5% 5,040 10.3% 40.0% 0.0%
Thai Airways 5,644 13.7% 5,640 12.0% 5,461 11.4% 5,436 11.1% -3.2% -0.5%
Others 6,987 16.9% 8,360 17.8% 7,400 15.5% 5,843 11.9% 5.9% -21.0%
Total 41,287 100.0% 47,000 100.0% 47,785 100.0% 49,155 100.0% 15.7% 2.9%
No of seats Market share No of seats Market share No of seats Market share No of seats Market share Past 1 year Next 6 months
Singapore
MAS 7,520 15.3% 7,608 15.7% 8,856 19.6% 9,348 20.6% 17.8% 5.6%
AirAsia 16,380 33.4% 16,380 33.8% 13,860 30.7% 12,960 28.5% -15.4% -6.5%
Singapore Airlines 4,845 9.9% 4,845 10.0% 3,420 7.6% 4,845 10.7% -29.4% 41.7%
SilkAir 5,670 11.6% 6,494 13.4% 5,140 11.4% 6,974 15.3% -9.3% 35.7%
Tiger Airways 5,400 11.0% 5,040 10.4% 5,040 11.2% 5,040 11.1% -6.7% 0.0%
Jetstar Asia 9,180 18.7% 8,100 16.7% 8,820 19.5% 6,300 13.9% -3.9% -28.6%
Total 48,995 100.0% 48,467 100.0% 45,136 100.0% 45,467 100.0% -7.9% 0.7%
No of seats Market share No of seats Market share No of seats Market share No of seats Market share Past 1 year Next 6 months
Indonesia
MAS 11,574 18.1% 14,898 19.0% 17,726 20.9% 17,212 19.7% 53.2% -2.9%
AirAsia 21,960 34.3% 27,180 34.7% 28,980 34.1% 28,980 33.2% 32.0% 0.0%
Indonesia AirAsia 16,920 26.4% 22,680 28.9% 22,500 26.5% 24,660 28.2% 33.0% 9.6%
Lion Air 4,389 6.9% 5,964 7.6% 6,222 7.3% 5,796 6.6% 41.8% -6.8%
Garuda Indonesia 2,184 3.4% 2,184 2.8% 2,184 2.6% 2,184 2.5% 0.0% 0.0%
Others 6,966 10.9% 5,471 7.0% 7,261 8.6% 8,510 9.7% 4.2% 17.2%
Total 63,993 100.0% 78,377 100.0% 84,873 100.0% 87,342 100.0% 32.6% 2.9%
No of seats Market share No of seats Market share No of seats Market share No of seats Market share Past 1 year Next 6 months
Philippines
MAS 4,000 38.0% 4,620 40.3% 4,592 40.3% 4,592 46.9% 14.8% 0.0%
AirAsia 2,520 23.9% 1,800 15.7% - 0.0% 720 7.3% -100.0% nm
Zest Air 672 6.4% 1,176 10.3% 3,240 28.4% 1,980 20.2% 382.1% -38.9%
Cebu Pacific Air 2,806 26.7% 2,806 24.5% 2,506 22.0% 2,506 25.6% -10.7% 0.0%
Others 531 5.0% 1,067 9.3% 1,067 9.4% - 0.0% 100.9% -100.0%
Total 10,529 100.0% 11,469 100.0% 11,405 100.0% 9,798 100.0% 8.3% -14.1%
No of seats Market share No of seats Market share No of seats Market share No of seats Market share Past 1 year Next 6 months
Myanmar
MAS 1,120 23.5% 1,650 35.5% 2,296 40.8% 2,296 40.8% 105.0% 0.0%
AirAsia 2,520 52.9% 2,520 54.2% 2,520 44.8% 2,520 44.8% 0.0% 0.0%
Myanmar International 1,127 23.6% 483 10.4% 810 14.4% 810 14.4% -28.1% 0.0%
Total 4,767 100.0% 4,653 100.0% 5,626 100.0% 5,626 100.0% 18.0% 0.0%
No of seats Market share No of seats Market share No of seats Market share No of seats Market share Past 1 year Next 6 months
Vietnam
MAS 4,960 31.3% 5,115 32.0% 5,084 30.8% 4,592 31.1% 2.5% -9.7%
AirAsia 7,020 44.3% 7,020 43.9% 7,560 45.8% 6,300 42.7% 7.7% -16.7%
Vietnam Airlines 3,864 24.4% 3,864 24.2% 3,864 23.4% 3,864 26.2% 0.0% 0.0%
Total 15,844 100.0% 15,999 100.0% 16,508 100.0% 14,756 100.0% 4.2% -10.6%
No of seats Market share No of seats Market share No of seats Market share No of seats Market share Past 1 year Next 6 months
Cambodia
MAS 2,720 41.8% 2,805 35.6% 2,952 43.9% 2,952 43.9% 8.5% 0.0%
AirAsia 3,780 58.2% 3,780 48.0% 3,780 56.1% 3,780 56.1% 0.0% 0.0%
Cambodia Angkor Air - 0.0% 1,288 16.4% - 0.0% - 0.0% nm nm
Total 6,500 100.0% 7,873 100.0% 6,732 100.0% 6,732 100.0% 3.6% 0.0%
31 Dec 2012 - 6 Jan 2013 1-7 Jul 2013 30 Dec 2013 - 5 Jan 2014 30 Jun - 6 Jul 2014 Increase (%)
31 Dec 2012 - 6 Jan 2013 1-7 Jul 2013 30 Dec 2013 - 5 Jan 2014 30 Jun - 6 Jul 2014 Increase (%)
31 Dec 2012 - 6 Jan 2013 1-7 Jul 2013 30 Dec 2013 - 5 Jan 2014 30 Jun - 6 Jul 2014 Increase (%)
31 Dec 2012 - 6 Jan 2013 1-7 Jul 2013 30 Dec 2013 - 5 Jan 2014 30 Jun - 6 Jul 2014 Increase (%)
31 Dec 2012 - 6 Jan 2013 1-7 Jul 2013 30 Dec 2013 - 5 Jan 2014 30 Jun - 6 Jul 2014 Increase (%)
31 Dec 2012 - 6 Jan 2013 1-7 Jul 2013 30 Dec 2013 - 5 Jan 2014 30 Jun - 6 Jul 2014 Increase (%)
31 Dec 2012 - 6 Jan 2013 1-7 Jul 2013 30 Dec 2013 - 5 Jan 2014 30 Jun - 6 Jul 2014 Increase (%)
SOURCES: CIMB, OAG, CAPA
-
AirlinesAirAsia Bhd
February 27, 2014
15
Further details on AirAsia's 4Q13 results
Figure 17: Malaysia AirAsia's core net profit (RM m)
41
16 9
51
14 13 11
92
18
50 47
111
24
-4
-77
124
166
128
34
122107
165
209
348
124143
171
282
157
130
168
327
154
98
131137
-100
-50
0
50
100
150
200
250
300
350
400
1Q 05
2Q 3Q 4Q 1Q 06
2Q 3Q 4Q 1Q 07
2Q 3Q 4Q 1Q 08
2Q 3Q 4Q 1Q 09
2Q 3Q 4Q 1Q 10
2Q 3Q 4Q 1Q 11
2Q 3Q 4Q 1Q 12
2Q 3Q 4Q 1Q 13
2Q 3Q 4Q
SOURCES: CIMB, COMPANY REPORTS
Figure 18: Core net profit breakdown, by country
FYE Dec (RM m) 4QFY13 4QFY12 yoy % qoq % 4QFY13 4QFY12 yoy %
chg chg Cum Cum chg Comments
Malaysia core net profit 136.9 326.5 (58.1) 4.8 519.3 782.2 (33.6) Malaysia saw a 58% decline in core net profit, due to yield pressure
and weaker ringgit offsetting capacity growth.
+ Share of Thai AA (45%) 18.1 33.4 (45.8) 29.3 85.8 85.1 0.8 Thailand's core earnings plunged 46% due to weak yields and lower
loads, partially offset by higher capacity.
+ Share of Indo AA (49%) (58.1) 12.1 nm nm (49.5) 22.8 nm Indonesia plunged into the red amid significant yield pressure and
the rupiah depreciation, despite strong capacity growth.
+ Share of AA Php (40%) (9.9) (9.1) 9.3 16.4 (36.0) (34.2) 5.3 The Philippines's losses widened, likely due to deterioration in yields
amid heavy competition in the Philippine aviation space.
+ Share of AA Japan (49%) - (19.4) (100.0) nm (59.5) (50.2) 18.5 Japan saw the last of its losses in 2Q13, as it has been sold back
to partner ANA.
+ Share of AACOE (50%) 1.7 2.4 (29.2) (39.3) 8.9 9.0 (1.1) The training school saw weaker earnings.
+ Share of Expedia (50%) 8.9 3.1 187.1 25.4 8.1 (11.8) 168.6 Expedia's earnings improved, but we caution that its contribution
has regularly swung between profits and losses.
+ Share of BIG (50%) -0.8 0.2 nm nm (3.8) (5.4) (29.6) The BIG loyalty programme remains in the red.
Group core net profit 96.8 349.2 (72.3) (33.5) 473.2 797.5 (40.7) Group core earnings for 4Q13 fell 72% yoy. SOURCES: CIMB, COMPANY REPORTS
-
AirlinesAirAsia Bhd
February 27, 2014
16
Figure 19: Revenue metrics
4QFY13 4QFY12 yoy % qoq % 4QFY13 4QFY12 yoy %
chg chg Cum Cum chg Comments
Revenue (RM m) 1,354.0 1,408.4 (3.9) 5.8 5,181.3 4,995.9 3.7 4Q13 revenue dipped 3.9% yoy, led by commendable capacity increases
- Underlying fare 934.1 1,050.4 (11.1) 5.1 3,632.7 3,684.0 (1.4) but offset by a sharp reduction in yields. RASK was similarly weak as
- Ancillary income 234.6 216.3 8.5 8.8 882.5 777.0 13.6 loads only rose by 2.2% pts despite the cheaper fares. Fare revenue fell,
- Lease income & others 185.3 141.7 30.8 5.3 666.2 534.9 24.5 though ancillary and lease income increases picked up some of the slack.
ASK (m) 8,139 7,357 10.6 4.0 31,582 28,379 11.3 Demand growth was slightly better than capacity growth, leading to a
RPK (m) 6,885 6,059 13.6 12.5 25,333 22,731 11.4 2.2% pts improvement in PLF. 4Q13's loads is now close to AirAsia's
Load factor (%) 84.6% 82.4% 2.2% 6.4% 80.2% 80.1% 0.1% internal target of 85% PLF.
Pax carried (000) 5,913 5,206 13.6 12.3 21,853 19,679 11.0 Pax carried rose 13.6% yoy in 4Q13, in line with RPK growth.
Pax yield (sen/RPK) 16.97 20.91 (18.8) (6.0) 17.82 19.63 (9.2) Pax yields fell by a massive 19% yoy in 4Q13 as fare yields collapsed.
- Underlying fare 13.57 17.34 (21.7) (6.6) 14.34 16.21 (11.5) Despite the sharply lower fares, AirAsia's planes were not very much
- Ancillary income 3.41 3.57 (4.6) (3.3) 3.48 3.42 1.9 fuller, with PLF rising just 2.2% pts. As MAS and Malindo are embarking
on similar load active, yield passive strategies, AirAsia had to offer huge
Pax RASK (sen/ASK) 14.36 17.22 (16.6) 1.8 14.30 15.72 (9.1) discounts in fares to compete. Ancillary yield dropped as well as marginal
- Underlying fare 11.48 14.28 (19.6) 1.1 11.50 12.98 (11.4) passengers are most cost-conscious.
- Ancillary income 2.88 2.94 (2.0) 4.7 2.79 2.74 2.1
Avg rev / pax (RM) 198 243 (18.8) (5.8) 207 227 (8.9) Average revenue/pax dipped 19% in 4Q13, with base fare/pax falling
- Underlying fare 158 202 (21.7) (6.5) 166 187 (11.2) by a significant 22%.
- Ancillary income 40 42 (4.5) (3.1) 40 39 2.3
No of aircraft @ end 72.0 64.0 12.5 9.1 72.0 64.0 12.5 Malaysia added eight aircraft over the past year.
Avg no of aircraft 69.0 61.5 12.2 4.5 66.5 58.6 13.4 SOURCES: CIMB, COMPANY REPORTS
Figure 20: AirAsia average fare breakdown (RM/pax)
142156
174192
155180
154178 171 170 174
214189 198 195
229
198
160142
176 172 173 173188
165 164180
196177 177
192 202 181159 169 158
7
10
12
11
11
13
11
1212 13 15
15
1618 23
22
29
2736
25 3843 44
49
45 4439
40
40 37
4042
42
3941
40
0
50
100
150
200
250
300
1Q 05
2Q 3Q 4Q 1Q 06
2Q 3Q 4Q 1Q 07
2Q 3Q 4Q 1Q 08
2Q 3Q 4Q 1Q 09
2Q 3Q 4Q 1Q 10
2Q 3Q 4Q 1Q 11
2Q 3Q 4Q 1Q 12
2Q 3Q 4Q 1Q 13
2Q 3Q 4Q
Ancillary income/pax Underlying fare/pax
SOURCES: CIMB, COMPANY REPORTS
-
AirlinesAirAsia Bhd
February 27, 2014
17
Figure 21: MAA - RPK vs. ASK growth (%) and PLF yoy change (% pts)
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
1Q 06
2Q 3Q 4Q 1Q 07
2Q 3Q 4Q 1Q 08
2Q 3Q 4Q 1Q 09
2Q 3Q 4Q 1Q 10
2Q 3Q 4Q 1Q 11
2Q 3Q 4Q 1Q 12
2Q 3Q 4Q 1Q 13
2Q 3Q 4Q
PLF yoy change (% pts) - LHS
RPK yoy growth (%)
ASK yoy growth (%)
SOURCES: CIMB, COMPANY REPORTS
Figure 22: MAA - Passenger load factor and yoy change (%)
50%
55%
60%
65%
70%
75%
80%
85%
90%
-10%
-5%
0%
5%
10%
15%
1Q 06
2Q 3Q 4Q 1Q 07
2Q 3Q 4Q 1Q 08
2Q 3Q 4Q 1Q 09
2Q 3Q 4Q 1Q 10
2Q 3Q 4Q 1Q 11
2Q 3Q 4Q 1Q 12
2Q 3Q 4Q 1Q 13
2Q 3Q 4Q
PLF yoy change (LHS) Passenger load factor (%)
SOURCES: CIMB, COMPANY REPORTS
Figure 23: Malaysia's overall yield (sen/RPK) and growth (%)
0
5
10
15
20
25
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
1Q 05
2Q3Q4Q1Q 06
2Q3Q4Q1Q 07
2Q3Q4Q1Q 08
2Q3Q4Q1Q 09
2Q3Q4Q1Q 10
2Q3Q4Q1Q 11
2Q3Q4Q1Q 12
2Q3Q4Q1Q 13
2Q3Q4Q
Growth (LHS) Overall yield (sen/RPK)
SOURCES: CIMB, COMPANY REPORTS
-
AirlinesAirAsia Bhd
February 27, 2014
18
Figure 24: AirAsia's overall RASK (sen/ASK) and growth (%)
0
2
4
6
8
10
12
14
16
18
20
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
1Q 05
2Q3Q4Q1Q 06
2Q3Q4Q1Q 07
2Q3Q4Q1Q 08
2Q3Q4Q1Q 09
2Q3Q4Q1Q 10
2Q3Q4Q1Q 11
2Q3Q4Q1Q 12
2Q3Q4Q1Q 13
2Q3Q4Q
Growth (LHS) Overall RASK (sen/ASK)
SOURCES: CIMB, COMPANY REPORTS
Figure 25: Growth in AirAsia's underlying fare and ancillary income (%)
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
1Q 05
2Q3Q4Q1Q 06
2Q3Q4Q1Q 07
2Q3Q4Q1Q 08
2Q3Q4Q1Q 09
2Q3Q4Q1Q 10
2Q3Q4Q1Q 11
2Q3Q4Q1Q 12
2Q3Q4Q1Q 13
2Q3Q4Q
Underlying fare/pax growth (%)
Ancillary income/pax growth (%)
SOURCES: CIMB, COMPANY REPORTS
Figure 26: AirAsia's fleet in Malaysia (number of aircraft)
5 711
1519
27 2933
37 4044 46 46 46
47 48 48 5052 53 53 53 54
57 57 58 5964 66 66 66
72
1919
1916
15
1010
8
86
4
0
10
20
30
40
50
60
70
80
1Q 06
2Q 3Q 4Q 1Q 07
2Q 3Q 4Q 1Q 08
2Q 3Q 4Q 1Q 09
2Q 3Q 4Q 1Q 10
2Q 3Q 4Q 1Q 11
2Q 3Q 4Q 1Q 12
2Q 3Q 4Q 1Q 13
2Q 3Q 4Q
B737 A320
SOURCES: CIMB, COMPANY REPORTS
-
AirlinesAirAsia Bhd
February 27, 2014
19
Figure 27: Cost metrics
FYE Dec (RM m) 4QFY13 4QFY12 yoy % qoq % 4QFY13 4QFY12 yoy %
chg chg Cum Cum chg Comments
Operating costs (RM m) 905.0 811.9 11.5 7.4 3,455.7 3,173.6 8.9 Op costs rose 11.5% yoy in 4Q13 due to higher capacity. Fuel
- Fuel cost 573.0 550.7 4.0 6.5 2,132.3 1,947.9 9.5 consumption grew by 11% yoy but US$-denominated
- Staff cost 161.8 166.8 (2.9) 17.9 606.8 580.3 4.6 jet fuel prices dipped by a similar 11%. The ringgit depreciated
- Maint, user & station, etc. 113.8 112.6 1.1 (33.8) 605.8 533.3 13.6 5% against US$.
- Others 56.3 -18.2 nm nm 110.8 112.1 (1.1)
Asset-related costs (RM m) 320.6 287.8 11.4 0.2 1,256.2 1,100.5 14.1
- Depreciation 160.5 149.0 7.7 (2.7) 634.5 562.2 12.9 Higher depreciation and interest expense due to the increase in
- Leasing of aircraft 49.9 41.6 19.9 2.2 189.4 159.5 18.7 AirAsia's fleet size.
- Interest expense 110.3 97.2 13.5 3.7 432.4 378.8 14.1
UNIT COST ANALYSIS
Cost / ASK (sen) 11.12 11.04 0.8 3.3 10.94 11.18 (2.2) Unit cost rose by a marginal 0.8% yoy in 4Q13 due to higher
- Fuel cost 7.04 7.49 (6.0) 2.4 6.75 6.86 (1.6) non-fuel costs and leasing charges.
Fuel unit cost dipped due to lower jet fuel prices.
- Non-fuel costs 4.08 3.55 14.9 4.8 4.19 4.32 (3.0)
- Staff cost 1.99 2.27 (12.3) 13.4 1.92 2.04 (6.0)
- Maint, user & station, etc. 1.40 1.53 (8.6) (36.3) 1.92 1.88 2.1
- Others 0.69 -0.25 nm nm 0.35 0.39 (11.2)
- Other costs 3.94 3.91 0.7 (3.6) 3.98 3.88 2.6
- Depreciation 1.97 2.02 (2.6) (6.4) 2.01 1.98 1.4
- Leasing of aircraft 0.61 0.57 8.4 (1.7) 0.60 0.56 6.7
- Interest expense 1.36 1.32 2.6 (0.2) 1.37 1.33 2.6 SOURCES: CIMB, COMPANY REPORTS
Figure 28: Fuel cost analysis
4QFY13 4QFY12 yoy % qoq % 4QFY13 4QFY12 yoy %
chg chg Cum Cum chg Comments
Net jet fuel price (US$/bbl) 131.0 148.0 (11.5) (0.8) 135.0 134.8 0.1 AirAsia's jet fuel price fell by US$17/barrel to US$131/barrel. AirAsia's
Barrels consumed (m) 1.35 1.22 11.3 8.0 4.59 4.69 (2.0) earnings was aided by the lower fuel price.
ASK / barrel used 6,010.0 6,046.6 (0.6) (3.8) 6,876.4 6,056.3 13.5
Average RM:US$ 3.21 3.06 5.0 (1.0) 3.15 3.09 2.0 In 4Q13, the ringgit weakened against the US dollar, which increased
Cost of fuel (US$ m) 177.4 180.1 (1.5) 7.2 620.0 631.7 (1.8) RM-denominated fuel cost.
Cost of fuel (RM m) 573.0 550.7 4.0 6.5 2,132.3 1,947.9 9.5 SOURCES: CIMB, COMPANY REPORTS
Figure 29: Average jet fuel price (US$/barrel)
57
6863
5864
73
96
77 77
86 84
99
110
143
162
104
62 60
79 80
90
100
90 88
117
140132135
126133
129
148
134
124132
131
0
30
60
90
120
150
180
1Q 05
2Q 3Q 4Q 1Q 06
2Q 3Q 4Q 1Q 07
2Q 3Q 4Q 1Q 08
2Q 3Q 4Q 1Q 09
2Q 3Q 4Q 1Q 10
2Q 3Q 4Q 1Q 11
2Q 3Q 4Q 1Q 12
2Q 3Q 4Q 1Q 13
2Q 3Q 4Q
SOURCES: CIMB, COMPANY REPORTS
-
AirlinesAirAsia Bhd
February 27, 2014
20
Figure 30: Quarterly results
FYE Dec (RM m) 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13
Revenue 1,272.7 1,168.4 1,181.6 1,237.5 1,408.4 1,300.8 1,246.3 1,280.3 1,354.0
Operating costs (763.8) (804.5) (830.9) (844.3) (853.5) (906.5) (892.1) (891.7) (954.8)
EBITDA 508.9 363.9 350.7 393.2 554.9 394.3 354.2 388.6 399.2
EBITDA margin (%) 40.0 31.1 29.7 31.8 39.4 30.3 28.4 30.4 29.5
Depn & amort. (142.2) (130.7) (137.9) (144.5) (149.0) (154.0) (155.2) (164.8) (160.5)
EBIT 366.7 233.2 212.7 248.7 405.9 240.4 198.9 223.8 238.7
Interest expense (95.8) (90.5) (94.4) (96.6) (97.2) (106.3) (109.4) (106.3) (110.3)
Interest & invt inc 15.3 18.4 19.6 20.5 20.9 24.3 14.3 16.4 13.7
Associates' contrib (1.8) (11.0) (8.3) (4.0) 19.5 (3.8) 12.9 23.9 28.7
Exceptionals 53.4 62.4 1,087.4 90.6 13.6 (22.8) (4.1) (132.6) 2.7
Pretax profit 337.9 212.4 1,217.0 259.1 362.8 131.8 112.6 25.1 173.5
Tax (202.2) (40.0) (22.1) (101.3) (12.1) (27.0) (54.3) 10.4 71.8
Tax rate (%) 59.8 18.8 1.8 39.1 3.3 20.5 48.2 (41.3) (41.4)
Minority interests - - - - - - - - -
Net profit 135.7 172.4 1,194.9 157.8 350.6 104.8 58.3 35.5 245.4
Core net profit 309.5 166.5 117.5 164.3 349.2 141.6 89.3 145.5 96.8
EPS (sen) 4.9 6.2 43.0 5.7 12.6 3.8 2.1 1.3 8.8
Core EPS (sen) 11.1 6.0 4.2 5.9 12.6 5.1 3.2 5.2 3.5
Reconciliation to core net profit
Net profit 135.7 172.4 1,194.9 157.8 350.6 104.8 58.3 35.5 245.4
- Associates 1.8 11.0 8.3 4.0 (19.5) 3.8 (12.9) (23.9) (28.7)
- Exceptionals (53.4) (62.4) (1,087.4) (90.6) (13.6) 22.8 4.1 132.6 (2.7)
+ Deferred tax/(income) 198.1 36.2 14.6 96.9 9.0 22.8 48.0 (13.6) (77.1)
Malaysia core net profit 282.1 157.3 130.3 168.2 326.5 154.2 97.6 130.6 136.9
+ Share of Thai AA (45%) 30.8 30.8 11.9 9.0 33.4 31.7 22.0 14.0 18.1
+ Share of Indo AA (49%) 2.7 (6.1) 4.9 11.9 12.1 0.2 8.0 0.4 (58.1)
+ Share of AA Phiippines (40%) (3.7) (5.0) (9.9) (10.2) (9.1) (8.0) (9.6) (8.5) (9.9)
+ Share of AA Japan (49%) (3.0) (11.2) (16.6) (19.4) (33.2) (26.3) - -
+ Share of AA India (49%)
+ Share of AACOE (50%) 4.1 3.3 2.2 1.1 2.4 1.9 2.5 2.8 1.7
+ Share of Expedia (50%) (2.2) (8.6) (8.8) 2.5 3.1 (4.2) (3.7) 7.1 8.9
+ Share of BIG (50%) (4.5) (2.2) (1.9) (1.5) 0.2 (1.0) (1.3) (0.9) (0.8)
Group core net profit 309.5 166.5 117.5 164.3 349.2 141.6 89.3 145.5 96.8 SOURCES: CIMB, COMPANY REPORTS
Figure 31: Breakdown of exceptional items
FYE Dec (RM m) 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13
Total exceptionals 53.4 62.4 1087.4 90.6 13.6 -22.8 -4.1 -132.6 2.7
- Exchange gain / (loss) -137.4 166.7 -160.3 164.2 8.9 -63.7 -179.5 -260.1 -45.5
- Effective forex derivative gain/(loss) 66.8 -104.1 111.0 -106.1 -7.1 33.8 63.3 85.3 12.2
- Ineffective derivative gain/(loss) 24.0 -10.4 -23.6 32.7 12.3 4.6 33.8 27.4 26.8
- Currency hedge unwinding gain - - - - - - - - -
- AAJ 49% stake disposal gain - - - - - - 78.27 - -
- Asset disposal gains 50.3 10.1 1160.4 -0.3 -0.5 2.5 0.0 14.8 9.2 SOURCES: CIMB, COMPANY REPORTS
-
AirlinesAirAsia Bhd
February 27, 2014
21
Figure 32: Quarterly operating metrics
4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13
Revenue (RM m) 1,272.7 1,168.4 1,181.6 1,237.5 1,408.4 1,300.8 1,246.3 1,280.3 1,354.0
- Underlying fare 951.2 852.8 869.6 911.2 1,050.4 934.1 875.7 888.8 934.1
- Ancillary income 193.4 191.1 180.0 189.6 216.3 217.2 215.1 215.6 234.6
- Lease income & others 128.1 124.5 132.0 136.7 141.7 149.5 155.5 175.9 185.3
ASK (m) 6,775 6,907 7,038 7,077 7,357 7,700 7,915 7,828 8,139
RPK (m) 5,620 5,546 5,621 5,505 6,059 5,997 6,333 6,118 6,885
Passenger load factor (%) 83.0% 80.3% 79.9% 77.8% 82.4% 77.9% 80.0% 78.2% 84.6%
Passengers carried (000) 4,855 4,821 4,903 4,749 5,206 5,168 5,510 5,263 5,913
Passenger yield (sen/RPK) 20.37 18.82 18.67 20.00 20.91 19.20 17.22 18.05 16.97
- Underlying fare 16.93 15.38 15.47 16.55 17.34 15.58 13.83 14.53 13.57
- Ancilliary income 3.44 3.45 3.20 3.44 3.57 3.62 3.40 3.52 3.41
Pax RASK (sen/ASK) 16.89 15.11 14.91 15.55 17.22 14.95 13.78 14.11 14.36
- Underlying fare 14.04 12.35 12.36 12.88 14.28 12.13 11.06 11.35 11.48
- Ancillary income 2.85 2.77 2.56 2.68 2.94 2.82 2.72 2.75 2.88
Avg rev / pax (RM) 236 217 214 232 243 223 198 210 198
- Underlying fare 196 177 177 192 202 181 159 169 158
- Ancillary income 40 40 37 40 42 42 39 41 40
No of aircraft @ end 57 57 58 59 64 66 66 66 72
Avg no of aircraft 55.5 57 57.5 58.5 61.5 65 66 66 69
4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13
Operating costs (RM m) 734.3 764.1 792.6 805.0 811.9 861.8 846.0 842.9 905.0
- Fuel cost 475.1 442.3 481.5 473.4 550.7 522.5 498.6 538.1 573.0
- Staff cost 127.0 151.0 123.9 138.7 166.8 146.3 161.4 137.3 161.8
- Maint, user & station, etc. 114.3 136.3 135.7 148.7 112.6 160.9 159.2 171.9 113.8
- Others 17.9 34.5 51.5 44.2 -18.2 32.1 26.8 -4.4 56.3
Other costs (RM m) 267.5 261.7 270.7 280.4 287.8 304.9 310.7 319.9 320.6
- Depreciation 142.2 130.7 137.9 144.5 149.0 154.0 155.2 164.8 160.5
- Leasing of aircraft 29.5 40.4 38.3 39.3 41.6 44.7 46.1 48.8 49.9
- Interest expense 95.8 90.5 94.4 96.6 97.2 106.3 109.4 106.3 110.3
UNIT COST ANALYSIS
Cost / ASK (sen) 10.84 11.06 11.26 11.38 11.04 11.19 10.69 10.77 11.12
- Fuel cost 7.01 6.40 6.84 6.69 7.49 6.79 6.30 6.87 7.04
- Non-fuel costs 3.83 4.66 4.42 4.69 3.55 4.41 4.39 3.89 4.08
- Staff cost 1.87 2.19 1.76 1.96 2.27 1.90 2.04 1.75 1.99
- Maint, user & station, etc. 1.69 1.97 1.93 2.10 1.53 2.09 2.01 2.20 1.40
- Others 0.26 0.50 0.73 0.63 -0.25 0.42 0.34 -0.06 0.69
- Other costs 3.95 3.79 3.85 3.96 3.91 3.96 3.93 4.09 3.94
- Depreciation 2.10 1.89 1.96 2.04 2.02 2.00 1.96 2.11 1.97
- Leasing of aircraft 0.44 0.58 0.54 0.55 0.57 0.58 0.58 0.62 0.61
- Interest expense 1.41 1.31 1.34 1.37 1.32 1.38 1.38 1.36 1.36 SOURCES: CIMB, COMPANY REPORTS
Thai AirAsia
Please see our separate results report also issued today.
-
AirlinesAirAsia Bhd
February 27, 2014
22
Indonesia AirAsia
Figure 33: IAA ASK (m) Figure 34: IAA RPK (m)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
1Q 08
2Q 3Q 4Q 1Q 09
2Q 3Q 4Q 1Q 10
2Q 3Q 4Q 1Q 11
2Q 3Q 4Q 1Q 12
2Q 3Q 4Q 1Q 13
2Q 3Q 4Q
Growth (LHS) IAA ASK (m)
0
500
1,000
1,500
2,000
2,500
3,000
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
1Q 08
2Q 3Q 4Q 1Q 09
2Q 3Q 4Q 1Q 10
2Q 3Q 4Q 1Q 11
2Q 3Q 4Q 1Q 12
2Q 3Q 4Q 1Q 13
2Q 3Q 4Q
Growth (LHS) IAA RPK (m)
SOURCES: CIMB, COMPANY REPORTS SOURCES: CIMB, COMPANY REPORTS
Figure 35: IAA - RPK vs. ASK growth (%) and PLF yoy change (% pts)
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%PLF yoy change (% pts) - LHS
RPK yoy growth (%)
ASK yoy growth (%)
SOURCES: CIMB, COMPANY REPORTS
Figure 36: IAA ASK vs. RPK growth (%) Figure 37: IAA Passenger load factor and yoy change (%)
-10%
0%
10%
20%
30%
40%
50%
60%
70%
1Q 09
2Q 3Q 4Q 1Q 10
2Q 3Q 4Q 1Q 11
2Q 3Q 4Q 1Q 12
2Q 3Q 4Q 1Q 13
2Q 3Q 4Q
RPK yoy growth (%) ASK yoy growth (%)
50%
55%
60%
65%
70%
75%
80%
85%
-10%
-5%
0%
5%
10%
1Q 08
2Q3Q4Q1Q 09
2Q3Q4Q1Q 10
2Q3Q4Q1Q 11
2Q3Q4Q1Q 12
2Q3Q4Q1Q 13
2Q3Q4Q
PLF yoy change (% pts) Passenger load factor (%)
SOURCES: CIMB, COMPANY REPORTS SOURCES: CIMB, COMPANY REPORTS
-
AirlinesAirAsia Bhd
February 27, 2014
23
Figure 38: IAA passengers carried (000) Figure 39: IAA fleet breakdown
0
500
1,000
1,500
2,000
2,500
0%
10%
20%
30%
40%
50%
60%
1Q 08
2Q 3Q 4Q 1Q 09
2Q 3Q 4Q 1Q 10
2Q 3Q 4Q 1Q 11
2Q 3Q 4Q 1Q 12
2Q 3Q 4Q 1Q 13
2Q 3Q 4Q
Growth (LHS) IAA pax carried (m)
0 02
57 8
9 10 1011 11
1416 16 16 17 17
19 1922 22
2426
30
11 11
117
66
66 6 4 4
4
4 4 4
0
5
10
15
20
25
30
35
1Q 08
2Q 3Q 4Q 1Q 09
2Q 3Q 4Q 1Q 10
2Q 3Q 4Q 1Q 11
2Q 3Q 4Q 1Q 12
2Q 3Q 4Q 1Q 13
2Q 3Q 4Q
B737 A320
SOURCES: CIMB, COMPANY REPORTS SOURCES: CIMB, COMPANY REPORTS
Figure 40: IAA yield (US cts/RPK) Figure 41: IAA RASK (US cts/ASK)
0
1
2
3
4
5
6
7
8
-30%
-20%
-10%
0%
10%
20%
30%
40%
1Q 08
2Q 3Q 4Q 1Q 09
2Q 3Q 4Q 1Q 10
2Q 3Q 4Q 1Q 11
2Q 3Q 4Q 1Q 12
2Q 3Q 4Q 1Q 13
2Q 3Q 4Q
Growth (LHS) IAA yield (US cts/RPK)
0
1
2
3
4
5
6
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
1Q 08
2Q 3Q 4Q 1Q 09
2Q 3Q 4Q 1Q 10
2Q 3Q 4Q 1Q 11
2Q 3Q 4Q 1Q 12
2Q 3Q 4Q 1Q 13
2Q 3Q 4Q
Growth (LHS) IAA RASK (US cts/ASK)
SOURCES: CIMB, COMPANY REPORTS SOURCES: CIMB, COMPANY REPORTS
Figure 42: IAA RASK vs. EBIT/ASK (US cts/RPK) Figure 43: IAA core net profit (US$ m)
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
1Q 08
2Q 3Q 4Q 1Q 09
2Q 3Q 4Q 1Q 10
2Q 3Q 4Q 1Q 11
2Q 3Q 4Q 1Q 12
2Q 3Q 4Q 1Q 13
2Q 3Q 4Q
RASK (US cts/ASK) EBIT/ASK
-7 -8
-1
1
-3-6
6
-4 -4
12
18
14 5 3
2
-4
4
96
0
5
0
-37-40
-30
-20
-10
0
10
20
30
1Q 08
2Q 3Q 4Q 1Q 09
2Q 3Q 4Q 1Q 10
2Q 3Q 4Q 1Q 11
2Q 3Q 4Q 1Q 12
2Q 3Q 4Q 1Q 13
2Q 3Q 4Q
SOURCES: CIMB, COMPANY REPORTS SOURCES: CIMB, COMPANY REPORTS
-
AirlinesAirAsia Bhd
February 27, 2014
24
Figure 44: Sector Comparison
PriceTarget
Price
(local curr) (local curr) CY2013 CY2014 CY2013 CY2014 CY2013 CY2014 CY2013 CY2014
AirAsia Bhd AIRA MK Hold RM2.38 RM2.40 2,024 14.0 24.7 -29.0% 1.32 1.18 9.5% 5.0% 2.5% 2.3%
AirAsia X Bhd AAX MK Hold RM0.86 RM0.99 623 na na na 1.65 1.49 -4.3% -8.4% 0.0% 0.0%
Asia Aviation Pcl AAV TB Reduce THB3.80 THB2.70 566 13.6 23.1 -3.4% 0.95 0.89 7.7% 4.0% 0.0% 0.0%
Tiger Airways TGR SP Reduce S$0.42 S$0.33 327 na na na 1.26 1.23 -41.7% -16.7% 0.0% 0.0%
Cebu Air CEB PM Reduce PHP48.95 PHP37.30 665 18.6 28.8 -16.2% 1.36 1.31 7.6% 4.7% 0.0% 0.0%
SpiceJet SJET IN Not Rated INR13.40 - 116 na na na na na 62.5% 226.7% 0.0% 0.0%
Air Arabia AIRARABI UH Not Rated AED1.53 - 1,944 16.0 14.4 10.8% 1.29 1.25 8.1% 8.8% 4.6% 4.6%
Ryanair RYA ID Not Rated 7.27 - 13,743 20.4 19.8 9.0% 3.15 3.00 16.0% 15.5% 1.5% 0.7%
easyJet EZJ LN Not Rated 16.76 - 11,063 18.6 15.2 19.3% 3.43 2.99 18.8% 21.1% 1.8% 2.2%
Southwest LUV US Not Rated US$22.44 - 15,753 21.0 16.3 15.3% 2.16 1.99 10.4% 12.7% 0.6% 0.6%
JetBlue JBLU US Not Rated US$9.04 - 2,673 17.8 12.7 11.4% 1.32 1.24 7.4% 10.1% 0.0% 0.0%
GOL GOL US Not Rated US$4.80 - 1,339 na na na 3.22 3.93 -56.5% -0.1% 0.2% 0.8%
WestJet WJA CN Not Rated C$25.19 - 2,918 13.4 12.0 3.7% 2.04 1.81 15.1% 15.9% 1.5% 1.9%
Low-Cost Carriers 21.4 18.4 9.1% 2.29 2.12 10.9% 11.9% 1.3% 1.2%
Cathay Pacific Airways 293 HK Add HK$15.14 HK$18.50 7,676 24.2 11.7 73.0% 0.99 0.92 4.2% 8.2% 0.9% 1.2%
China Eastern Airlines 670 HK Reduce HK$2.75 HK$2.30 4,976 21.8 12.5 -1.9% 1.02 0.94 5.3% 7.8% 0.0% 0.0%
China Southern Airlines 1055 HK Reduce HK$2.66 HK$2.40 3,905 23.1 10.2 4.5% 0.59 0.56 2.6% 5.6% 2.1% 1.4%
Air China 753 HK Hold HK$5.06 HK$5.40 8,096 14.3 9.9 9.0% 0.89 0.83 6.4% 8.6% 1.7% 1.7%
Korean Air 003490 KS Add Won34,450 Won40,000 1,898 na 47.3 na 0.96 0.86 -11.2% 1.9% 0.0% 0.0%
Asiana Airlines 020560 KS Hold Won5,260 Won5,200 963 na 85.1 na 1.02 1.00 -12.8% 1.2% 0.0% 0.0%
Malaysian Airline System MAS MK Reduce RM0.26 RM0.14 1,303 na na na 1.06 1.83 -40.3% -48.7% 0.0% 0.0%
Singapore Airlines SIA SP Hold S$10.14 S$10.50 9,408 22.7 18.3 22.4% 0.91 0.89 4.1% 4.9% 2.8% 3.7%
Thai Airways International THAI TB Reduce THB13.00 THB10.50 871 na na 26.3% 0.50 0.56 -9.4% -10.8% 0.0% 0.0%
Qantas Airways QAN AU Add A$1.27 A$1.39 2,505 na na -147.6% 0.51 0.57 -2.8% -6.1% 0.0% 0.0%
Virgin Australia Holdings VAH AU Reduce A$0.35 A$0.27 1,105 na na -232.1% 0.91 0.99 -8.0% -7.5% 0.0% 0.0%
China Airlines 2610 TT Not Rated TWD10.30 - 1,767 58.4 16.3 1534.7% 1.02 0.97 1.8% 6.1% 0.3% 0.6%
EVA Airways 2618 TT Not Rated TWD15.60 - 1,677 35.4 15.7 -3.9% 1.38 1.27 3.7% 8.4% 0.2% 0.6%
Garuda GIAA IJ Not Rated Rp481 - 935 21.9 10.1 0.0% 0.81 0.74 4.1% 7.6% 0.0% 0.0%
Full-Service Carriers 74.5 23.2 12.5% 0.86 0.84 1.2% 3.7% 1.2% 1.4%
P/BV (x)Recurring ROE
(%)
Dividend Yield
(%)CompanyBloomberg
TickerRecom.
Market
Cap (US$
m)
Core P/E (x)3-year
EPS
CAGR
(%)
SOURCES: CIMB, COMPANY REPORTS
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AirlinesAirAsia Bhd
February 27, 2014
25
Balance Sheet
(RMm) Dec-13A Dec-14F Dec-15F Dec-16F
Total Cash And Equivalents 1,385 1,541 1,753 2,152
Total Debtors 1,887 1,991 2,099 2,228
Inventories 30 30 30 30
Total Other Current Assets 0 0 0 0
Total Current Assets 3,301 3,562 3,882 4,409
Fixed Assets 11,246 12,097 12,676 13,297
Total Investments 0 0 0 0
Intangible Assets 389 534 481 394
Total Other Non-Current Assets 2,245 2,296 2,279 2,300
Total Non-current Assets 13,880 14,927 15,437 15,991
Short-term Debt 726 726 726 726
Current Portion of Long-Term Debt
Total Creditors 2,073 2,287 2,423 2,591
Other Current Liabilities 5 5 5 5
Total Current Liabilities 2,805 3,018 3,154 3,322
Total Long-term Debt 9,089 9,594 9,926 10,336
Hybrid Debt - Debt Component
Total Other Non-Current Liabilities 281 281 281 281
Total Non-current Liabilities 9,370 9,876 10,208 10,617
Total Provisions 0 0 0 0
Total Liabilities 12,175 12,894 13,361 13,940
Shareholders' Equity 5,006 5,595 5,957 6,461
Minority Interests 0 0 0 0
Total Equity 5,006 5,595 5,957 6,461
Profit & Loss
(RMm) Dec-13A Dec-14F Dec-15F Dec-16F
Total Net Revenues 5,181 5,608 6,047 6,574
Gross Profit 1,536 1,587 1,788 2,019
Operating EBITDA 1,536 1,587 1,788 2,019
Depreciation And Amortisation (634) (770) (861) (943)
Operating EBIT 902 818 927 1,076
Total Financial Income/(Expense) (405) (466) (484) (498)
Total Pretax Income/(Loss) from Assoc. 62 51 (17) 21
Total Non-Operating Income/(Expense) 42 50 50 50
Profit Before Tax (pre-EI) 600 453 477 649
Exceptional Items (157) 175 108 108
Pre-tax Profit 443 628 586 757
Taxation 1 128 (71) (106)
Exceptional Income - post-tax
Profit After Tax 444 756 514 652
Minority Interests 0 0 0 0
Preferred Dividends 0 0 0 0
FX Gain/(Loss) - post tax
Other Adjustments - post-tax
Net Profit 444 756 514 652
Recurring Net Profit 473 268 303 476
Fully Diluted Recurring Net Profit 473 268 303 476
Key Ratios
Dec-13A Dec-14F Dec-15F Dec-16F
Revenue Growth 3.7% 8.2% 7.8% 8.7%
Operating EBITDA Growth (7.6%) 3.3% 12.6% 12.9%
Operating EBITDA Margin 29.7% 28.3% 29.6% 30.7%
Net Cash Per Share (RM) (3.03) (3.16) (3.20) (3.20)
BVPS (RM) 1.80 2.01 2.14 2.32
Gross Interest Cover 2.09 1.69 1.84 2.06
Effective Tax Rate 0.0% 0.0% 12.2% 14.0%
Net Dividend Payout Ratio 28.7% 35.1% 32.1% 22.1%
Accounts Receivables Days 92.71 86.01 86.16 86.06
Inventory Days 2.67 2.68 2.53 2.37
Accounts Payables Days 198.7 197.9 201.8 201.4
ROIC (%) 5.58% 4.47% 4.75% 5.33%
ROCE (%) 6.49% 5.43% 5.82% 6.44%
Cash Flow
(RMm) Dec-13A Dec-14F Dec-15F Dec-16F
EBITDA 1,536 1,587 1,788 2,019
Cash Flow from Invt. & Assoc.
Change In Working Capital (423) 109 28 39
(Incr)/Decr in Total Provisions
Other Non-Cash (Income)/Expense
Other Operating Cashflow (269) 0 0 0
Net Interest (Paid)/Received 0 0 0 0
Tax Paid (11) (18) (18) (19)
Cashflow From Operations 833 1,679 1,798 2,039
Capex (2,271) (2,964) (2,143) (2,267)
Disposals Of FAs/subsidiaries 0 0 0 0
Acq. Of Subsidiaries/investments 56 1,478 812 812
Other Investing Cashflow 0 0 0 0
Cash Flow From Investing (2,215) (1,485) (1,331) (1,455)
Debt Raised/(repaid) 1,000 545 332 410
Proceeds From Issue Of Shares 0 0 0 0
Shares Repurchased 0 0 0 0
Dividends Paid (667) (167) (153) (147)
Preferred Dividends
Other Financing Cashflow 200 (416) (434) (448)
Cash Flow From Financing 533 (38) (255) (185)
Total Cash Generated (848) 156 212 399
Free Cashflow To Equity (382) 738 799 994
Free Cashflow To Firm (1,382) 194 467 584
0
5
10
15
20
25
30
35
40
45
50
Jan-10 Jan-11 Jan-12 Jan-13 Jan-14
Rolling FD P/E (x)
AirAsia Bhd AirAsia X Bhd
Asia Aviation PCL Malaysian Airline System
Tiger Airways
Key Drivers
Dec-13A Dec-14F Dec-15F Dec-16F
Av. Seat Km (ASK, Yoy Chg %) 11.3% 11.3% 5.4% 7.7%
Rev. Psg Km (RPK, Yoy Chg %) 11.4% 11.0% 5.4% 7.7%
Passenger Load Factor (%) 80.2% 80.0% 80.0% 80.0%
Pax yld per RPK (RM) 0.2 0.2 0.2 0.2
Pax rev. per ASK (RM) 0.1 0.1 0.1 0.1
Total Cost Per ATK (RM) - - - -
Fuel Cost Per ATK (RM) - - - -
Non-fuel Cost Per ATK (RM) 3,129.3 3,481.4 3,669.3 3,951.2
Jet Fuel Price (US$/barrel) 130.3 127.0 127.0 127.0
Fleet Size (no. Of Planes) 154 167 178 196
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AirlinesAirAsia Bhd
February 27, 2014
26
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AirlinesAirAsia Bhd
Februar