May 23 (Bloomberg) -- AirAsia Bhd., the region’s biggest budget carrier, reported its first drop in profit in five quarters as higher fuel and finance costs eroded gains from carrying more passengers.
Net income fell 39 percent to 104.8 million ringgit ($35 million) in the three months ended March 31, the Sepang, Malaysia-based airline said in a statement yesterday. Revenue climbed 11 percent to 1.30 billion ringgit.
AirAsia, competing with Lion Air and Jetstar for budget travelers in the region, declined the most in a week in Kuala Lumpur trading. Group Chief Executive Officer Tony Fernandes said the carrier has potential for “double digit” growth this year as AirAsia expands to India and increased its bet in the Philippines with a 49 percent stake in Zest Airways Inc.
The airline fell as much as 1.5 percent to 3.19 ringgit in Kuala Lumpur trading, and changed hands at 3.22 ringgit as of 9:45 a.m. The stock has jumped 25 percent this year, outperforming a 5.7 percent gain in the benchmark FTSE Bursa Malaysia KLCI Index.
The carrier said jet fuel costs rose 18 percent in the quarter to 523 million ringgit, while aircraft lease expense climbed 11 percent to 44.7 million ringgit. AirAsia also had a foreign exchange loss of 37.7 million ringgit on its borrowings, compared with a gain of 88 million ringgit a year earlier.
Such expenses eroded gains from carrying more passengers and charging higher fares. AirAsia’s passenger numbers rose 7 percent to 5.2 million in the period, and average fares increased by 2 percent, according to the statement.
The group is awaiting approval and hopes to start operations in India in the fourth quarter, Fernandes said in an interview today. The India unit, being set up in partnership with the Tata Group, will help AirAsia tap into a region that International Air Transport Association expects to become the world’s fastest-growing aviation market after Kazakhstan by 2016.
In March, AirAsia acquired the stake in Zest in the Philippines. The airline is expanding as the entry of Singapore Air’s Scoot and PT Lion Mentari Airlines’ Malaysian venture Malindo Airways boosts competition in the region.
AirAsia is also expanding its fleet. In December, the airline ordered 100 Airbus A320s valued at $9.4 billion, in addition to the 200 it had agreed in 2011 to purchase.
The group currently has 124 Airbus A320 aircraft in its fleet, compared with 118 at the end of 2012. While capacity went up by 9 percent in the first quarter, the carrier filled 79 percent of its seats, down by one percentage points.
The group’s long-haul arm AirAsia X Bhd. is aiming to raise as much as $300 million through a Malaysian initial public offering. The five year-old airline plans to offer 790.1 million shares to raise between $250 million and $300 million to help finance aircraft purchase.
The share sale is the second of the three proposed listings by AirAsia’s affiliates. Asia Aviation Pcl, the parent of Thai AirAsia Co., was the group’s first affiliate airline to sell shares, debuting in Bangkok’s stock exchange last year. Its Indonesian unit will also go public in the third quarter, Fernandes said in February.
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