13 August 2009

AirAsia thanks the little extras

KUALA LUMPUR - Budget carrier Air Asia has reported a strong quarterly result, boosted significantly by ancillary revenues.

Total revenue for the June 30 quarter grew by eight percent to RM657 million. The core operating profit of RM128 million was more than quadruple the profits achieved in the same period last year.

Passenger numbers for the period grew by 24 percent to 3.5 million.

"Despite lowering fares by an average of 19 percent, we still managed to produce strong profit growth with industry leading margins," said AirAsia CEO Tony Fernandes.

"Ancillary income grew by 89 percent to RM95 million. The average ancillary spend per passenger has increased by 52 percent to RM27," he added.

Ancillary income now represents 14.5 percent of total revenue, a six percentage-point increase from the same period last year.

"With new products and services, this business unit is expected to grow - unearthing new revenue streams for the company," said Fernandes.

"We have launched a low cost courier service and AirAsia
Savers Account in July. There are six more ancillary income initiatives in the pipeline waiting to be launched within the year."

Fernandes said rival airlines were offering aggressive pricing just to try to maintain their existing passenger base, "but in this intensely competitive market, the only sure winner is the one with the lowest unit cost base".

AirAsia this month deferred delivery of eight A320s due for 2010 delivery and said it expected to defer another eight due in 2011. It blamed the deferrals on infrastructure constraints caused by the failure of Malaysian Airports to start work on a proposed low cost terminal in Kuala Lumpur.

Fernandes said AirAsia would continue to dominate the Malaysian domestic market. Sales campaigns by rival Malaysia Airlines had had no impact on AirAsia, he said.

Malaysia Airlines said last week it had returned to profitability in the second quarter, boosted by revaluation gains from fuel hedging, but still made losses at the operating level.