AirAsia X Berhad (5238.KL) Earnings Call Transcript & Summary

Hello, everyone. Good evening. Thank you for joining us for the AAX Second Quarter 2025 Financial Results Release. Together with us, we have CEO, Ben; and online, we've got CFO, Lavinia, with us this evening. Ben, over to you.

Good evening, everybody. I apologize for the 15-minute space. We just finished the Board meeting. So again, thanks, Jane. Thank you, everybody, for joining our second quarter 30th June 2025 results release. Looking at Page 3 on the presentation, we posted a net profit of MYR 35.22 million, buoyed by favorable foreign exchange gains. Net operating profit also improved by 26% year-on-year to MYR 1.38 million, bolstered by lower jet fuel prices. Revenue stood at about MYR 660.8 million, marginally lower by 1% year-on-year, really driven by just the low seasonal season and also low fare environment. Average base fare at a competitive MYR 405, while ancillary RPP increased 4% to MYR 257 with us carrying about 6% more passengers. Passenger load factor, very healthy at 83% as capacity -- in line also with also an increase in capacity, 6% year-on-year, again, with also 6% passengers, which carried over 935,000 passengers. Again, second quarter usually is a tough one, but it was managed with load active yield passive strategy, also leveraging on a very, very good fuel environment. ASK capacity up 10% year-on-year with more aircraft and additional routes in the network this year. Again, 18 out of 19 aircraft activated, the final aircraft RTS again was deferred to the second half of the year, again, with prolonged global supply chain, which will still continue to push. CASK benefited from lower fuel price with a 13% year-on-year improvement to MYR 0.1205, while CASK ex-fuel was up 9% year-on-year to MYR 0.0638 with expanded operations since last year. Network is robust with recovery noted in China with PLF close to about 90% and recently announced our route to Tashkent to continue growing our Central Asia market. And obviously, one foot in into Europe with our announcement of Istanbul towards November this year. Our associate, TAAX reported a revenue of MYR 372.82 million and an operating loss of MYR 13.2 million due to softer travel demand to Thailand, generally following the earthquake incident and also related security concerns in Bangkok. Number of passengers carried reduced by 12% year-on-year to over 318,000 passengers, resulting in a PLF of 78% for the quarter. Again, on the proposed acquisition of AirAsia airlines, we are advancing towards the procurement of the clearance with Thai SEC, and so that's still in the works. And also the conclusion of private placements. And also Capital A continues to work on securing lessors' consents that is just around the corner. Just to the financial highlights. Revenue stood at about MYR 660.8 million, marginally down 1% year-on-year. This is 6% lower scheduled flight revenue with higher 6% passenger traffic, driven by lower base fares and also lower fuel prices. Freight revenue also reduced by 20% due to lower yield in the market and also, I guess, with the tariffs in America, the demand kind of slowed a little bit towards the last -- this quarter mitigated by ancillary revenue growing 10% year-on-year with ancillary RPP up 4% year-on-year to MYR 257. EBITDA strong at MYR 76.2 million, up 31% year-on-year, improved due to lower fuel prices, reduction in lease expenses and also operational expansions increased cost for staff, maintenance user charges, maintenance and marketing expenses. Net profit rose sharply to MYR 35.2 million from MYR 4.8 million in second quarter '24 due to net foreign exchange gains as it is. Seat capacity increased 6% year-on-year to over 1.1 million seats as the number of operational aircraft grew to 18 from 16. Load factor, as I mentioned earlier, remains very healthy at 83%, as the number of passengers increased by 6%, tracking capacity expansion despite second quarter being traditionally soft travel season. ASK grew by 10%, driven by 5% year-on-year sectors flown to 3,061 sectors driven by network expansion, which is very aggressive, especially with the addition of Chongqing, Karachi, Pakistan and also decreasing -- and increasing frequencies on some of our routes. Just an overview of our operating expenses. I think as you can see now as we spoke in a couple of quarters, you can see now it's starting to normalize. Total operating expenses reduced 5% year-on-year, mainly driven by lower fuel prices and also higher consumption due to high consumption of fuel and also the depreciation of the Malaysian ringgit compared to last year, offset by the rise in maintenance of overall expenses and user charges as operations expanded in the last 12 months. And also other operating expenses increased MYR 33 million due to, as we know, we're starting new routes this year and also commercial initiatives that we go in driving still for the business. I know this slide flowed in our presentation. Just want to keep highlighting that we still remain the lowest cost structure airline in the industry with the lowest CASK, driven really by high utilization of active fleet. We are currently probably posting close to 14 hours, prudent cost management by the team and also currency upside that we potentially can have. Ancillary revenue continue to outperform, recorded MYR 240.27 million in second quarter '25, 36% contribution from the total revenue. This is also driven by increase in passengers as well. And also -- and so the RPP recorded 257 during the quarter, marking a 4% increase. Again, this is driven by the team. It's dynamic pricing and also strategy and also AI that we've been doing through our web, and that's driven due to higher take-up in several upgrade options in flight service offerings, baggage and everything else that potentially that is on offer on our flight. Just a brief through on TAAX. Revenue stood at about MYR 372 million, posted an operating loss of MYR 13.2 million. Again, unfortunately, Thailand is now going through tough -- difficult periods with all kinds of issues there, especially with the earthquake and also security concerns. And also the slowdown in China markets. Our EBITDA also reduced by 50% to MYR 21.57 million due to higher operating expenses, higher staff costs related to increased flight allowance and engineering manpower chargebacks, mitigated by aircraft fuel expenses due to lower jet fuel prices and also increasing MR cost due to additional aircraft and utilization and higher escalation rate as well. Just a bit more on the operational highlights. The seat capacity stood at about 407,360 seats compared to previous year, following capacity management measures partly driven by ACMI operations during Hajj. During the quarter, passengers carried was 318,257 with PLF at 78% due to softer travel demand and temporary market headwinds in Thailand. Again, this is what our strengths are for the business, 24 destinations, added Karachi and Chongqing in the last 12 months, recovery in China, load factor over 90%, over 7 weekly flights for close to 50% of our network, growing Central Asia with Almaty being a success with increased frequency and also adding Tashkent in October. Also flying Istanbul. Tapping into all the opportunities of FlyThrus into Australia, Indonesia and the Philippines and also our FlyThru is growing exponentially as well in the rate of 20% with an internal target of about 30%. And then, of course, our network begins to grow within the group, 143 destinations, 292 routes, 99 unique routes where nobody else lies, 15 hubs, and of course, 90 million guests flown for the whole organization. Immediate outlook for us, again, is just focusing on enhancing network across more regions and continue to be -- continuing to operate high profitable routes. There are routes that we've unfortunately tried and we've removed. But generally, 80% of my routes are profitable. We are also looking in terms of fleet planning, working close with the MRO partners, ADE and also others to just complete our final phase of our fleet reactivation, ensuring that all the work has been done. I think this is a bit delayed. But unfortunately, that's something that we have to put up with. But then also with the commercial plans, we also work together with our commercial centralized functions where we make sure that our promotional activities in the near future is well tuned with our business strategy through targeted marketing and also optimization together with Capital A and also building our FlyThru traffic and incorporation of new products and partnerships as well. We continue to still have a strong relationship with Teleport despite revenue downside for just for this quarter due to the trade sales announcements, but on the positive side, we should be going towards a third and a very strong fourth quarter for Teleport and cargo as well. In terms of corporate focus area, again, we are just nearly around the corner, just on the final stage, again, and I keep saying that, but we're just on the final stage already, it's just more on the final -- to get a final approval, especially on the portfolio acquisition due to complete any time soon in terms of the CPs and also the Thai SEC is pretty much coming through. Internal targets, I can safely say we're still on target despite second quarter being a very low, lean quarter. That's pretty much expected. But I think moving into third and fourth, looking at the forward loads and also the fare, we look pretty strong for achieving our internal targets as what we guided at the start of the year. Again, seasonality, fourth quarter is going to be a very strong quarter for us, as usual. And also operational fleet size, we should have by 19 aircrafts by December and also network optimization, I expect to add more connection to South Asia and Central Asia region. And also aircraft costs, potentially maintenance may look -- it's trending down as it is as I mentioned in the last couple of calls, most of the C-checks have been done towards last year and this year. I think it should slow down by next year generally as it is. But potentially, we could see a lower cost structure for that. But that's it, really. Again, thank you very much. Sorry, I may not sound very excited. But I think we just had a very long Board meeting in 1:00. But I think I'm quite happy with the results. Again, we continue to make money, continue to be profitable. We have done well for a medium long haul kind of airline to ensure that this business is proven. And with our destinations that we fly to, we can make money generally in most of our destinations. So again, to all of you, thanks for all your support. It should be another strong first half and heading into a very stronger second half of the year for AirAsia X. Thanks, everybody.

[Operator Instructions]

Thank you very much for your hard work, especially on the operating metrics. The [ user base ] is fantastic. But looking at the cost structure, right? I think you are able to break even your profit, partly helped by the ForEx and oil price. But what have you done better in terms of the cost control? Just trying to visualize going into second half, especially on third quarter, would you be able to generate even better profit assuming the airfare is still favorable?

Yes. I think that in terms of the cost structure, I think the only thing that potentially will improve will be the maintenance overhaul. As I said earlier, I think if you can compare to last year, probably towards the second half of last year, you see the costs a bit more inflated only because there's a lot of aircraft going for checks. So I think the improvement mainly will be driven by that. The others, really, you won't see much really. As we grow, staff will increase, we have to get more pilots and crew. Fuel, if the environment improves, fuel price benefits, then it will be greater for us. But every other thing is really not much. I think, as you can see, our cost structure were pretty much quite lean. The only thing that we can do is just trying to reduce that maintenance, et cetera. But again, we have to make sure that we also drive revenue. Obviously, second quarter was lean, and you know this, if you follow this quite a while. Second quarter has always been like this. So usually, we will bounce back in third and of course, do record sales in fourth -- first, right? So not to worry, we will recover all those anyway in due time.

Just to understand. Looking at your MRO...

Can you speak louder? You're very soft, your voice.

Yes, it's a bit noisy here. [indiscernible] Yes. Just trying to understand on your MRO costs, especially the maintenance and overhaul. I think quarter-on-quarter, it has actually kind of like improved, right?

Keep it down, right?

Yes, yes. So how should we look at it going into third and fourth quarter? Because my assumption is that you have done majority of the check, especially for last aircraft, which are still pending for activation, right? How should we look at the cost going forward? Because I think this is the only part of the cost that you can improve further, just to understand. And also kind of give us some color on the operating environment as we go into third quarter and fourth quarter.

Yes. I mean maintenance and overall, I think I don't want to give you too much guidance, but I can say that going into third quarter, the number will continue to fall as third quarter, we had somehow less aircraft going into checks. By moving into fourth, we have a few coming in, we have a few big checks that are coming out and potentially the last aircraft that may be serviceable by then. But obviously, fourth quarter will go up again. But it should be normalized around this region anyway, but that should be lower. In terms of others, as I said, it's very tough, not much as we're pretty much lean. We have a very lean structure even though in terms of the -- you compare to our cost versus AirAsia, we're way lower as well. But in terms of the operating environment, I think it's been quite a bit of all kinds of stuff happening in my market. I think I could have done better in the second quarter, especially in some markets. One of the markets that took -- that surprised me in terms of decline was Japan. Generally Japan, my load factor overall towards every year, every month, it's about 95%. But for second quarter this year, my Japan load factor was only 72%, only because people didn't want to travel to Japan in the second quarter because of the manga comic that predicted Japan is going to have an earthquake in that. So therefore, there was a huge decline of sales, people moving flights and refunds and all that kind of stuff. So obviously, now that has gone, sales has gone up again in Japan. We are recording a 97% load factor for Japan towards this long weekend coming up. And of course, travel fare over the weekend in [ booking earlier ], the top seller was Japan. So it's just funny how news and scares have affected people in traveling. But generally, I think that's really why our fares has fallen down quite a bit. And of course, China, a little bit, there's a bit of a slowdown also towards second because of the trade wars and all that kind of stuff. But I think that will just die away in time anyway. So I'm not too worried too much. I think that just recover as we speak to moving into third and fourth.

Yes. On this topic on the China market, right? So just to understand because recently, China also kind of resumed their routes to India. I assume this will help to improve the queue a little bit going forward, right, as they put a big capacity for...

You said improve their -- increase their routes to India?

Yes, yes. They try to -- I mean recently, they -- on the news, they were saying that they will resume some routes to India and -- yes.

But I think that one, I don't think it will impact us that much. I mean I don't know whether you're asking me whether it's positive news or negative. It doesn't impact us that much because a lot of the traffic that comes from China is point-to-point. And also not just point-to-point, it's point-to-point to ASEAN regions only. So a lot of Chinese people are coming in via KL, connecting to Bali, Thailand or whatever. So you don't see many people going down south and going up north back to India, right? And the borders are right next to each other, so no impact from that.

Okay. It's a blessing in disguise that you don't have to record the Thailand operation in your P&L. I understand this. Just trying to understand whether there's some spillover effect, especially from China side as they don't travel to Thailand? Would you benefit from this trend?

If you ask me, we benefit quite a lot actually. A lot of people are coming over to Malaysia. But obviously, Thailand also is 49% for me, I said for them, they're not getting that traffic. But yes, we do get a lot of people moving over to us, especially the Chinese market towards Malaysia.

We have questions in the chat box. May I kindly follow up regarding the MYR 1 billion private placement?

I mean that's pretty much done. I think we're just waiting for a few more approvals. I think we -- that's all been identified. So there's no worry. We're not concerned about that. I think we're just waiting for Thai SEC approval. I think they've -- again, I don't think there's an issue, it is just more clarity in terms of what we're doing and all that kind of stuff. I think we are targeting that pretty much soon. Again, within weeks. But other than that, I think even on the CP side, I think we probably only have 1 or 2 left in terms of getting that approval. But other than that, I think we're on the right track.

There's also a follow-up on CPs and the Thai SEC's progress. If there's any update on revised timeline?

No. I think we hopefully should be completed by next month.

That's all in the chat box for now. The guidance for NOP is between MYR 157 million to MYR 220 million, and year-to-date is MYR 52 million, which is 33% done. Is that right?

In terms of the -- I'm not going to give you much color on that, but I think generally, looking at what we guided when we spoke to the Board meeting today, I think that looks quite a reasonable target. I think we should be okay, especially I think in third and fourth generally, I think the bulk of our profits are coming towards third and fourth anyway.

Hi, [ Matthew. ]

I noticed your fares also this quarter is down around 11%. And last quarter, was down 15% year-on-year. Should we expect this type of trend going forward for the second half of the year?

Did you say first quarter, 50%?

15%, 15%, I think. Yes. I think...

Yes, yes. But I think -- I mean, as I said in the last call, I think first quarter, we came from -- as you know, we are just coming out from a very high fare environment, right? So generally, I think if you're looking at it on a -- if you want to look back to a 2,000 pre-COVID rates in terms of fares, we're still 20% higher than pre-COVID. But yes, I think as we grow, I think as you can see, our capacity also has increased quite a bit. It's not flat. You can see our capacity has been increasing in double digits. So generally, you would see a bit of a dilution in fares. I don't know about third, I think we're looking -- we're trending quite okay, but let's see. But I think moving towards fourth, I think should be quite strong. But yes. I don't -- yes, that's all I can say.

All right. And maybe can you give us some color on the forward booking load factor in the third quarter, since it's really, I think, nearly end August and upcoming September, I believe that's...

I can tell you, I mean, I can tell you that it'll be in the 80s. So that's for sure. I'm trying to squeeze the team towards mid 80s. But I think that looks achievable. I think we're nearly there, but let's see. But I think -- but for sure, we're in the 80s.

And how's the reception in light on the new routes to Istanbul and Tashkent at the moment?

It's been good actually. Tashkent has done well, but Istanbul was better. I think on the immediate date that we launched it, we sold close to about 2,000 tickets. But it's been good. Yes, quite excited, actually. So it's just unfortunately, it's a very long flight. But yes, I think, hopefully, it should be good. All good, guys? Any more further questions?

[ Daniel ] here. I just want to understand how is the yield trends like for this year, for this quarter, it's actually down Q-on-Q, it is down quite more than your cost down on a Q-on-Q basis. I was expecting your revenue to drop less than your cost drop because you get the benefit of the lower fuel and also the exchange rate.

Actually, Daniel, as I said earlier, I think actually, everything else in terms of my other routes and destinations outperformed in terms of yields. The only 2 markets that really impacted me towards second quarter was Japan and China. Japan, again, as I repeated now, earlier, it's because of the manga news that came out that everybody didn't want to travel. So I've never seen my load factor for Japan in the low 70s. Japan has always been our top performer. So generally, in the whole month of second quarter, our load was 70s. And in the past, our load factor for Japan average will be about 88% to 90%. So that is a big contribution to the decline. In China, I think with the trade war that was happening and the trade rates and all that, I think we saw a bit of an uncertainty in that market for a bit. That also kind of -- even though the load factor was quite okay, we needed to stimulate. The reason only why it's high because we stimulate it through fare. We push travel. And a lot of the traffic that you see flying into China is mainly from Malaysia. Generally, you see in the past, a lot of the traffic is coming from China. So I can only say it's because of those 2, to be honest, my other routes, Australia outperformed, Almaty outperformed, India outperformed, Korea outperformed. Yes, so they've done quite well actually. So they are just those 2.

Okay. Well, I understand that Japan manga thing, I thought it predict -- it's more a July factor. I mean...

The second quarter [indiscernible]. April, May, June, but the whole people didn't want to fly because the whole time, it was during that period that lead up to it. It's just we didn't know, we didn't know when the earthquake is going to be, right? So they were leading up to the -- leading to that. So after that, the sales improved. I don't why, weird.

I see. So we are expecting third quarter yield to improve. Is this a significant improvement?

It should be better than second quarter.

Should be better. Are we looking at similar to the first quarter level?

The first quarter, a bit tough. The first quarter and the fourth quarter, very strong, right?

So we're looking at a more in the mid of between first and second quarter?

Maybe.