AirAsia Announces 2002 Financial Results

AirAsia, Asia`s first low fares, no frills, ticketless airline today announced its financial result for year 2002. The announcement was made at a media conference in conjunction with the airline`s one year anniversary of low fares, no frills flights. AirAsia was transformed from a full service carrier to a low cost carrier when the airline launched its new “low fares, no frills” concept to the Malaysian public on 15 January 2002, a month after Tune Air took over the airline from DRB Hicom.


AirAsia recorded an overall improvement of its financial results which is primarily due to high passenger traffic, increase in revenues and effective cost management.


Operating revenue grew by 32.5% to RM222.3m compared to RM167.8m in 2001, driven by growth in scheduled revenue and ancillary revenue. This is attributed to the increase in passenger volume arising from the expansion of routes from 5 to 7 and the increase in frequencies for higher demand sectors such as Kota Kinabalu, Langkawi, Kuching and Penang.Passenger volume grew by more than 100% in financial year 2002 to 621,899 from only 271,118 in financial year 2001. This resulted in a 5% improvement in load factor comparatively.During this period the distribution channels have seen a major shift from dependence on travel agents which used to be 70% but currently accounts for only 2% of total revenue. On the contrary, the preferred distribution channel which is the internet has increased from 0% to 25% currently. To date, the internet has recorded sales of RM26m. AirAsia`s website www.airasia.com is arguably the top e-commerce website in Malaysia and is expected to gain more popularity as more people are now taking advantage of the convenience of online booking. Ancillary income increased tremendously to RM7.7m in financial year 2002 compared to only RM0.1m in financial year 2001. This is reflected by strong growth in all areas of ancillary revenue particularly aircraft advertising, food and merchandising and other related activities.
With disciplined cost management, operational cost has dropped by 11% from 70% of revenue in financial year 2001 to 59% of revenue in financial year 2002. Cost per ASK of RM0.123 represents a 36% reduction from the previous financial year. This improvement is primarily due to increase in capacity and greater efficiencies in maintenance and ground operations resulting in greater productivity and reduction in cost of fuel, lease, distribution and ground operations. A major decrease in operational cost is the 82% reduction in airport and handling charges due to self handling as opposed to outsourcing to third parties. On marketing, the aggressive promotion of online bookings through the internet has been a key contributing factor to reducing the distribution cost of third party services. The internet is now AirAsia`s most cost effective distribution channel. As a result of re-engineered processes, greater efficiency and focused attention to cost control, maintenance and engineering cost has also dropped by 20%. AirAsia has entered into several agreements with reputable world-class organizations for maintenance and engineering support to ensure safety and reliability.


Through a combination of maximizing revenue and reduction of all cost components, AirAsia has managed to turnaround a loss of RM19.1m in the first eight months of the financial year to a RM19.4m profit in the seven months since Tune Air took over, resulting in a net income of RM232,000. At the point of takeover, AirAsia had outstanding trade liabilities from major creditors amounting to RM40m. During this period, all major outstanding balances have been repaid.


After the first financial year end June 2002, AirAsia has continued to show strong passenger growth. The six months period recorded 665,440 passengers compared to only 621,899 in the previous 15 months. Load factor also increased to 70% compared to 67% in financial year 2002 with the addition of three new destinations, Miri, Tawau and Kuala Terengganu. Despite reducing fares to attract traffic, our yield per RPK has grown from RM0.136 to RM0.155 for the six months period from Jul 2002 - Dec 2002. Operating revenue for the period July to December 2002 is RM114.3m.

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The cost per ASK of RM0.109 for the period July 2002 - Dec 2002 is one of the lowest in the world, if not the lowest. This compares favorably to RyanAir`s cost per ASK of RM0.219 and EasyJet`s RM0.281. The reduction in cost is the result of cost control measures and greater efficiencies in maintenance and engineering.


With continued efforts of maximizing revenue and further efficiencies in maintenance and distribution combined with further reduction in insurance and other costs, net income for the six months was RM11.8m or 10% of revenue. AirAsia is currently in a net tangible asset position with a healthy cash balance.


The results:
1.1 million passengers carried
/ No effect on MAS domestic loads
/ MAS loads have grown - shows that AirAsia targets a different market
/ All creditors were paid
/ Introduction of internet sales has been a roaring success
/ Started new routes
/ Greater connectivity - introduced first direct flight from Kuala Lumpur
to Tawau
/ AirAsia successfully moved operations from Subang to KLIA
/ Increased number of planes from 2 to 6
/ Established in-house training facilities
/ AirAsia engineering granted M1 approval
/ AirAsia`s own hangar currently being built
/ AirAsia is now established as the premier low cost airline in Asia by foreign and local press
In conjunction with its one year anniversary of low fares, no frills flights, AirAsia recently offered a minimum of 3,000 seats at RM10 one way for travel between 14th to 16th January 2003 to all AirAsia destinations. This offer was available exclusively through AirAsia`s website at www.airasia.com. Response from the public for this unbelievable “must fly” deal was equally amazing - 3380 seats were sold at RM10!


“This is not the first time we introduced such a promotion, only this time around, we offered more seats. This is our way of celebrating one wonderful year of low fares, no frills with the Malaysian public who have shown tremendous support to our new concept. We wanted the RM10 deal to provide the opportunity to those who have not flown before to experience flying for the first time.”
- YBhg. Dato` Pahamin A. Rajab, Chairman, AirAsia -


On 12 December 2001, Tune Air took over AirAsia by acquiring 51.68 million shares from DRB Hicom. With this acquisition, the concept of the airline was changed from a full-service carrier to a low fares, no frills concept modeled after successful budget airlines such as the Dublin-based Ryanair and US-based Southwest Airlines. From the original four routes, AirAsia added six new routes and now operates point-to-point flights from its KLIA hub to Penang, Langkawi, Kota Bharu, Kuala Terengganu, Kuching, Miri, Kota Kinabalu, Labuan and Tawau. In the past year since takeover, AirAsia has carried over 1.1 million passengers, recording a growth of over 300% compared to the year before takeover. The airline also recently reached a new record for carrying 5,300 passengers and 10,600 bags in a single day on 28th November 2002.


AirAsia operates a fleet of five 737-300 aircraft and recently took delivery of its sixth aircraft. This additional aircraft will be utilized to improve connectivity by increasing frequencies to existing routes. This aircraft will also support the newly introduced Kota Kinabalu - Kuching route which will commence on 25th January 2003. AirAsia operates a young fleet of aircraft with the average age of seven years that strictly adheres to the regulations by the internationally reputed Department of Civil Aviation (DCA) and fully complies with the conditions of the International Aviation Safety.

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