KUCHING: AirAsia X Bhd (AAX) CEO, Benyamin Ismail and team recently hosted an outlook briefing with analysts and Datuk Kamarudin Meranun (Group CEO), explained that he and the board of directors feel that AAX would perform fairly better in 2016 with internal stress testing and number crunching pointing to operating profit.
MIDF Amanah Investment Bank Bhd’s research arm (MIDF Research) noted that they believe that 4Q15 results could be in the black at net operating income (NOI) level on the back of higher yields (revenue per unit) due to more rational pricing; improved load factors (utilisation rate) due to seasonality and lower industry capacity; and lower average spot jet kerosene price.
While profitable at NOI level, the main deterrent to a positive profit after tax (PAT) remains its interest expenses which would be higher due to the higher average US dollar to Ringgit exchange rate of 27 per cent on year.
“Nonetheless, we believe that AAX’s 4Q15 results will likely break-even at PAT level,” noted the research house.
On the issue of potential threats by Malindo which is expanding its network to medium-long haul destinations such as Australia and China, management believes that AAX remains ahead of the competition.
AAX flies A330 wide-body aircraft against Malindo’s B737 narrow-body. The bigger aircraft offers advantages such as higher operating efficiency and comfort to passengers while pricing its fares lower.
Moreover, Malindo could find itself in MAB’s crosshairs or vice-versa as Malindo positions itself more as a full service airline.
AAX will be able to reap the benefits of lower jet fuel prices in 2016 as it has currently hedged 50 per cent of its 2016 requirements at US$60 per barrel (bbl) which is 32 per cent lower than its 2015 hedge at US$88 per bbl.
Meanwhile, spot jet kerosene is trading at US$40 per bbl which is 38 per cent lower than the 2015 average of US$65 per bbl.
On a blended average basis, if jet kerosene prices were to remain at current levels for the remainder of the year, AAX would enjoy fuel cost savings of 35 per cent, paying US$50 per bbl compared to 2015’s US$77 per bbl.
“Meanwhile, we expect the weaker ringgit to be cushioned by natural hedges as 75 per cent dollar denominated cost is hedged against 70 per cent foreign currency revenue.”