February 26, 2014 / 11:12 AM / 6 years ago

AirAsia's profit drops 19 percent on higher fuel, maintenance costs

KUALA LUMPUR (Reuters) - Malaysia’s AirAsia Bhd (AIRA.KL), Asia’s biggest budget airline by passenger traffic, saw its fourth-quarter profit drop 19 percent on higher expenses for fuel and aircraft maintenance.

A staff worker of Air Asia works inside the Air Asia office in Sepang outside Kuala Lumpur November 19, 2013. REUTERS/Samsul Said

Net profit for the three months ended Dec 31 fell to 245.4 million ringgit ($74.78 million), while net profit for the full year stood at 364.1 million ringgit compared to 789.6 million ringgit in 2012 due to the prior year’s gain from a disposal of shares in its Thai subsidiary.

The company hopes to reduce costs by another 7.5 percent this year, according to its group chief executive Tony Fernandes in a press statement, after operating expenses in 2013 rose 6.4 percent from a year ago.

It will reduce the number of staff as more of its services will be automated; and improve on the sharing of resources with its long-haul arm AirAsia X Bhd (AIRX.KL), Fernandes, who is also AirAsia’s co-founder, said.

AirAsia, which is also a key customer of European planemaker Airbus (AIR.PA), will be deferring 7 aircraft this year and 12 more in 2015 in favor of a more fuel efficient A320 to reduce cost, he added.

OVERSEAS UNITS

AirAsia will take on two new aircraft in Thailand and two in India within the first quarter of this year, when loads might see a boost from the Chinese New Year and school holidays, the company said in a filing to the local bourse.

AirAsia will reduce its fleet in its Philippine subsidiary to 14 planes, as it cuts down on domestic routes and builds international connectivity from Manila and Kalibo, it added.

For its Thailand operations, AirAsia warned that it will see marginal impact from the country’s political unrest, although strong domestic travel could offset the drop in overseas passengers.

In Indonesia, it will increase flights from Bandung and link the city to international hubs such as Penang and Kuching. The overseas unit posted an operating loss of 369.09 billion rupiah ($31.63 million) as costs escalated on the back of a weakening rupiah.

Malaysian Airline System MASM.KL (MAS) reported on February 18 a net loss of 343.3 million ringgit on high costs and tough competition.

Shares of AirAsia ended 1.28 percent higher at 2.38 ringgit per share before the earnings result was released.

AirAsia in a separate filing announced its proposal to buy back 10 percent of its shares in a move to safeguard its shares against speculative trading.

The company’s earnings per share (EPS) will also improve with fewer shares floated, it added. It will convene a meeting with shareholders to table the proposal.

Additional Reporting by Yantoultra Ngui in KUALA LUMPUR AND Tripti Kalro in BANGALORE; Editing by Jane Merriman and Stephen Powell

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