AirAsia X, the long-haul affiliate of Malaysia-based low-cost carrier (LCC) AirAsia, has reported a net loss of MYR86.9 million ($24.5 million) for the financial year to Dec. 31, 2013, reversing the MYR33.9 million profit reported for FY2012.
High fuel costs and the strengthening of the dollar against the Malaysian ringgit were cited as particular contributors to the poor profit performance.
However, the airline also reported a 17.3% increase in revenue year-on-year, to MYR2.3 billion from almost MYR2 billion in 2012, despite a 19% growth in ASKs from 16.2 billion in FY2012 to 19.3 billion last year. This was largely as a result of increased frequency being added to existing routes and the opening of six new routes. RPKs for the year were up 16.6% from 13.6 billion during the year-ago period to 15.9 billion in FY2013.
Passenger numbers were up 22.5% to 3.2 million in FY2013, from 2.6 million in the previous year. Average load factor was down to 82.1% year-on-year from 83.8%, largely due to increased capacity on mature routes.
AirAsia X also operated a higher number of charter and wet-lease flights during the year, resulting in an increase in revenue from this sector to MYR107 million from MYR67.8 million in FY2012.
However, operating costs were also significantly higher, largely due to the increase in capacity. Overall, operating expenses were up 19.3% for the year to MYR2.3 billion in FY2013 from MYR1.9 billion the previous year.
An increase in headcount means staff costs were up almost 30% year-on-year, while fuel costs increased 18.7% to MYR1.1 billion last year from MYR925.3 million in FY2012. This the airline largely attributed to higher fuel consumption as a result of the increase in sectors flown, as well as higher average fuel prices in FY2013 compared to the previous financial year.
Unfavorable exchange rate trends also adversely affected the airline’s fuel bill, with approximately 65% of its operating expenses denominated in dollars. The bulk of this is fuel expenses, accounting for 47.8% of total expenses. As a result, the airline incurred a non-cash foreign exchange translation loss of MYR176.2 million.
Operating profit for the year was MYR35.6 million, although this was down from almost MYR49 million during the year-ago period.
AirAsia X CEO Azran Osman-Rani said: “Despite challenging market conditions, we seized the opportunity to invest substantial capacity to strengthen our market position in our core markets to ensure we remain the world’s largest long-haul LCC operator, with a much larger network scale compared to others. We believe the short-term earnings pressure arising from newly introduced capacity will be well worth the long-term strategic value as yields rise with the maturing of this new capacity. Despite a similarly large capacity increase in 2014, we are already seeing signs of yield improvement from our forward sales.”
He said that aggressive cost controls would be deployed in 2014 “to ensure we remain the world’s lowest unit cost airline operator, and be in a better position to withstand short-term yield pressures.”