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AirAsia Gains as Currencies Help Profit Beats Estimates

AirAsia Bhd. (AIRA), Asia’s largest budget carrier, advanced the most in a month in Kuala Lumpur trading as foreign-exchange gains helped the airline report profit that beat estimates.

AirAsia climbed as much as 2.9 percent, the biggest intraday rise since July 21, to 2.45 ringgit and traded at 2.42 ringgit as of 9:08 a.m. in Kuala Lumpur. The stock has advanced 10 percent this year, compared with a 0.5 percent rise in the FTSE Bursa Malaysia KLCI Index.

Second-quarter profit surged by more than sixfold, masking a 17 percent drop in operating profit because of lower fares and a loss at its Thailand unit. Chief Executive Officer Tony Fernandes, 50, has expanded the Sepang, Malaysia-based airline to India, Japan and much of Southeast Asia as economic growth in the region enables more people to fly.

Earnings “were above our and market expectations,” analysts including Hong Kong-based Patrick Xu at Barclays Plc said in a note dated yesterday. “We expect yields to turn flattish in third quarter and be positive in the fourth quarter driven by easier competition.”

More than a dozen budget airlines have started across India and other parts of Asia in the past decade amid the surge in air travel. Airlines have ordered hundreds of new aircraft even as increasing competition have pushed fares down.

Photographer: Yuriko Nakao/Bloomberg

Tony Fernandes, Chief Executive Officer of AirAsia Bhd. Close

Tony Fernandes, Chief Executive Officer of AirAsia Bhd.

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Photographer: Yuriko Nakao/Bloomberg

Tony Fernandes, Chief Executive Officer of AirAsia Bhd.

Cut-rate fares and capital expenditure to buy new planes have pushed down profitability at some budget airlines, prompting an industrywide restructuring in the past year and delaying taking delivery of aircraft.

Average Fares

AirAsia said yesterday it delayed and sold “some aircraft slots” to swap for the newer more fuel-efficient aircraft to better manage its capacity.

Profit in the three months to June jumped to 367.2 million ringgit ($116 million) from 58.3 million ringgit a year earlier. Sales increased 5.2 percent to 1.31 billion ringgit.

AirAsia posted 202.9 million ringgit in foreign-exchange gains from its borrowings, compared with a 122.2 million ringgit loss a year earlier, according to the statement.

The airline moved 5.57 million passengers across its network, 1 percent more than a year earlier. Average fares dropped 1 percent to 157 ringgit, according to a statement from the airline yesterday.

To contact the reporter on this story: Kyunghee Park in Singapore at kpark3@bloomberg.net

To contact the editors responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

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