MAS, AirAsia lifted by festive period

PETALING JAYA: On the back of year-end school holidays and festive seasons, the last three months of 2010 have proved to be another bumper quarter for the local aviation industry, with national carrier Malaysian Airline System Bhd (MAS) and budget airline AirAsia Bhd both reporting passenger growth that helped boost their financial results.

It seems clear, though, that AirAsia's business model continues to thrive, and gives the company a performance that outshines the national carrier, be it in terms of passenger growth or earnings.

AirAsia's net profit for the fourth quarter (Q4) of last year jumped more than eight-fold to RM316.5mil, compared with only RM33.9mil in Q4 2009, while full year earnings doubled and hit RM1.1bil, driven by strong passenger numbers and yields. This was despite the increase in fuel costs, after the average fuel prices surged 35% year-on-year (y-o-y) to US$92 per barrel in 2010.

MAS, on the other hand, could not effectively avert the effects of higher fuel prices. The company saw its net profit for Q4 2010 fell 65% y-o-y to RM226mil, on account of higher fuel costs, which rose 13% y-o-y, as well as other operational costs such as sales and commission expenses. Its full-year earnings of RM234.5mil were in line with management's guidance.

During the quarter in review, AirAsia carried one billion more passengers than MAS. Passenger volume growth was also stronger at AirAsia, with the number growing 11.1% y-o-y and 10% quarter-on-quarter (q-o-q) to 4.44 billion in Q4, while that of MAS grew only a marginal 1.4% y-o-y and 3.9% q-o-q to 3.44 billion. In terms of passenger load factor, AirAsia's rose three percentage points to 82% in Q4, while that of MAS increased a mere 0.9 percentage point to 77.4%. AirAsia attributed its Q4 revenue growth of 32.7% y-o-y to RM1.2bil mainly to higher ancillary income and average fares, while MAS, which reported a revenue growth of 8.9% y-o-y to RM3.6bil in Q4 2010, attributed its topline growth to strong passenger traffic as well as higher fuel surcharges and average fares.

It was obvious that MAS' passenger business was still lagging behind AirAsia's. For instance, MAS' yield for the segment, as measured by revenue per RPK (revenue passenger kilometer), grew 5.4% y-o-y to 24.3 sen, while that of AirAsia grew 10% y-o-y to 22.3 sen.

Revenue per ASK (available seat per kilometer) for AirAsia in Q4 2010 stood at 18.4 sen, up 29.6% y-o-y, while MAS' stood at 18.8 sen, up 6.5% y-o-y. In terms of cost management, MAS seemed to perform better. During the quarter in review, MAS' cost per ASK (including fuel) fell 3.4% y-o-y to 27.2 sen; excluding fuel, cost per ASK fell7.3% y-o-y to 17.8 sen.

“This is an area whereby MAS is the top performer. Revenue is volatile, but cost reduction is structural,” Maybank Investment Bank Bhd said in its report. AirAsia's cost per ASK rose 4.6% y-o-y to 11.85 sen; excluding fuel, cost per ASK rose 1.2% y-o-y to 7.31 sen.

The shares of both AirAsia and MAS were presently trading above their book value, of RM1.31 and RM1.05 per share respectively.

Yesterday, AirAsia shares closed at RM2.52, a gain of three sen, while MAS shares closed at RM1.89, a loss of three sen from last Friday.

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