AirAsia Net Income Jumps Sixfold as China Spurs Fleet Expansion

AirAsia Plans to Expand Fleet to Meet Travel Demand
  • Net income in quarter to March at $216 million; Sales jump 31%
  • Will add 5 planes this year and up to 10 in 2017: Chairman

AirAsia Bhd., Southeast Asia’s biggest budget carrier, reported an almost sixfold jump in quarterly profit amid plans to expand its fleet in a region projected to surpass the U.S. as the world’s biggest air-travel market in two decades, led by China.

The Sepang, Malaysia-based company said net income in the quarter through March climbed to 877.8 million ringgit ($216 million) from 149.3 million ringgit a year earlier, topping the average 149 million ringgit predicted by analysts in a Bloomberg survey. Revenue rose 31 percent to 1.7 billion ringgit, aided by growth in passenger volume and an 11 percent increase in average fares, the carrier said in a filing.

“Barring unforeseen circumstances, the directors remain positive for the prospects of the group in 2016,” it said in a statement.

AirAsia Chairman Kamarudin Meranun said in an interview in Kuala Lumpur Wednesday that the airline is looking to add five aircraft this year and as many as 10 more in 2017 “depending on demand.” The company, which has 170 planes in its fleet, is also planning to increase the number of destinations in China from 18 and frequency of its flights in the world’s second-biggest economy, he said.

Strongest Growth

AirAsia is among airlines in the region adding more aircraft as economic growth and rising incomes make air travel affordable to more people. Last month, Xiamen Airlines Co., a unit of China Southern Airlines Co., ordered 10 single-aisle jets worth about $851 million from Boeing Co., while the U.S. planemaker and its European rival Airbus Group SE split a $9.9 billion order for wide-body jetliners from China Eastern Airlines Corp.

“We see the strongest growth in China,” Kamarudin said. 

International visitor demand into the Asia Pacific region is forecast to grow at an average rate of 4.6 percent each year to more than 657 million by 2020, according to a report released last month by Pacific Asia Travel Association.

Southeast Asia will continue with its dramatic increase in foreign arrivals, improving its relative share from just under 20 percent in 2015 to around 22.5 percent by 2020, when it will rival the share of the Americas at that time, the report said. By 2034, one in five passengers in the world will be traveling to, from, or within China, according to the International Air Transport Association.

Cleaning Up

AirAsia carried 13.9 million passengers in the first quarter, according to preliminary operating statistics on May 9. That’s 17 percent more than the same period last year and well ahead of 6 percent increase in capacity.

AirAsia X Bhd., its long-haul arm, on Tuesday reported first-quarter net income of 179.5 million ringgit, swinging from a loss of 125.9 million ringgit a year ago. Revenue rose 25 percent to 970.7 million ringgit.

AirAsia is also looking to “clean up” its operations in the Philippines and Indonesia this year, Kamarudin said, adding that the plan won’t involve additional funding from the company. AirAsia Philippines is on track for an initial share sale in 2018, he said.

Shares of the low-cost carrier slumped 6.2 percent to 2.12 ringgit in Kuala Lumpur Thursday. They have surged 64 percent this year, outperforming the benchmark FTSE Bursa Malaysia KLCI Index, which declined 3.6 percent over the same period.

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