AirAsia Announces Massive Profits!

On the Financial Edge: AirAsia post net profit RM203.15m in 1Q

• KUALA LUMPUR: AirAsia Bhd’s earnings rose 26% to RM203.15 million in the first quarter, up 26% from RM161.28 million a year ago.
  
  It said on May 28 the higher earnings were due to higher yields, lower unit costs and one-off Rm48.53 million item gain. Revenue rose 33% to RM714.18 million from RM535.32 million.
  
  Yield rose 12% to 13.7 sen per ASK, while unit costs fell 18% to 8.6 sen per ASK while load factor declined to 69.7%.

On Forbes: Budget carrier AirAsia's profit jumps 26 percent

• Budget carrier AirAsia's profit jumps 26 percent
  By EILEEN NG , 05.28.09, 06:42 AM EDT
  
  Budget carrier AirAsia said Thursday its net profit surged 26 percent in the first quarter from a year ago, reflecting the success of its aggressive network expansion amid the global economic slump.
  
  AirAsia rebounded from two straight quarterly losses to a record a profit of 203.2 million ringgit ($56.4 million) for the quarter through March, it said in a statement.
  
  Revenue increased 33 percent to 714 million ($198 million), buoyed by a sharp rise in passenger volume and increased contribution from ancillary income, it said.
  
  "AirAsia once again delivered record profit growth despite operating in one of the most challenging economic environments," Chief Executive Tony Fernandes said in a statement.
  
  He said the airline carried 3.15 million passengers during the period, up 21 percent from a year ago, showing that it had successfully stimulated the market to seize share from competitors.
  
  AirAsia accounted for 44 percent of passenger traffic at Malaysia's main airport during the quarter.
  
  "We're adding routes, increasing frequencies, hiring more staff, enhancing our capabilities and growing our airline...our strategy to continuously conduct aggressive promotions and enhance customer service has been successful in driving strong traffic growth," he said.
  
  AirAsia said it expects passenger growth of 15 to 20 percent this year despite the economic crisis. In 2008, it carried 11.8 million passengers, up 22 percent from a year ago.
  
  Last year, AirAsia posted its first-ever loss of 471.7 million ringgit ($131 million).
  
  Fernandes said passenger demand remained robust based on forward booking trend in the second quarter.
  
  "The dramatic cuts in flights and capacity by many of Asia's legacy carriers have resulted in severe traffic decreases at many of Asia's airports. This is creating enormous opportunities for AirAsia," he said.
  
  The carrier, which lost money in the previous quarter after unwinding fuel hedges and interest rate swaps related to aircraft loans, said it is now buying fuel on the spot market and enjoying low prices.
  
  As of March, it said it has a fleet size of 74 operational aircraft and has expanded capacity by 19 percent as it launched seven new routes in the first quarter.
  
  AirAsia said its Thai affiliate posted its best quarterly profit of 298 million baht ($8.5 million) during the January-March period, thanks to increased sales as its rivals scaled back and canceled flights.
  
  Its Indonesian unit is still in the red but losses have narrowed by half to 37 billion rupiah ($3.2 million), it said.

Everyone knows I am such a fan. :D

Net profit of 203.150 million woh!

• "AirAsia once again delivered record profit growth despite operating in one of the most challenging economic environments," Chief Executive Tony Fernandes said in a statement.

Let's see how AirAsia has delivered. :D

Firstly as stated on the Financial Edge article.

• It said on May 28 the higher earnings were due to higher yields, lower unit costs and one-off Rm48.53 million item gain

Why wasn't this mention on the Forbes/Associated Press article?

On 27 February 2009, I wrote AirAsia Reported Massive Losses Again!!. Of course, AirAsia were quick to stress on the media that Exceptional item drags down AirAsia Q4 results

Now that one time off rm48.53 item gain wasn't the only thing.

Of course there is the forex gain of 90.374 million. (sorry made an error - should be losses!)

And then of course there is the deferred tax of 79 million. You can see how the deferred tax is added into the earnings.

Back on Feb 27th, on a Dow Jones newswire, the following was said.

• KUALA LUMPUR (Dow Jones)--AirAsia Bhd (5099.KU) no longer has any fuel hedges, after it has unwound its positions for the remaining hedges in the fourth quarter ended Dec. 31, Group Chief Executive Tony Fernandes said Friday.
  
  "We have decided to unwind our hedges in the fourth quarter...(We have) no more fuel hedges," Fernandes said in a conference call.
  
  In the fourth quarter, AirAsia took a hit via a MYR426 million exceptional loss relating to the unwinding of its derivative structures, which included fuel hedging.
  
  This resulted in the budget airline posting a quarterly loss of MYR176.9 million, compared with a MYR245.7 million net profit a year earlier.
  
  Fernandes said the airline doesn't intend to re-hedge its fuel requirements until volatility stabilizes and is "looking at doing something" about fuel hedging in 2010 or 2011 but hasn't firmed up plans yet.
  
  AirAsia also "decided to take some short-term pain" by unwinding its currency hedge and interest rate swap, which it had taken at around 4.5% to 5.0%, as it felt that those should be replaced at lower rates that can be obtained in the market currently.

So they got burned.

And guess what's happening now?

Waaa.. old habits die hard, no? Hedging all over again. Serial hedger ah? :D

• As at 31 March 2009, the Group has a net sell Put position of 2.2 million barrels at prices of USD 35/barrel and USD 42/barrel for the period up to June 2010. These net sell positions will expire progressively up to June 2010. As at end of today (28 May 2009), the net sell position is 1.6 million barrels.

Err.. sorry for being such a noob but is AirAsia making money now with these hedges?

And Maverick, I know you will be reading this. Did you see the following new entry in its balance sheet.

And oh....

Congratulations to AirAsia for posting Massive Profits! You have delivered so well, under such difficult operating conditions.

Jolly good job!