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

Hi, everyone. Good evening. Thank you for joining us on a Friday evening. So online, currently, we have Ben, CEO; and Lavinia, CFO, with us. So as usual, Ben will do the presentation, and then we can do the question-and-answer session right after. Over to you, Ben.

Hi, everybody. Good evening. Welcome to the 3Q '25 results. So let's get into it. Revenue increased 1% year-on-year to MYR 803.5 million on the back of a very good healthy fare environment and high ancillary revenue. Net operating profit up 4x to MYR 12 million versus MYR 3 million in 3Q '24, driven a little bit by fuel costs and also stronger local currency, while net profit stood at MYR 27.8 million and CASK ex-fuel among the peers still standing fairly strong at MYR 0.1268, down 9% year-on-year and MYR 0.0672 year-on-year, respectively, with better fuel prices and firmer ringgit bolstered by 9% hike in ASK capacity. Average base fare, which a lot of you were a bit worried throughout the last few quarters have rose by 5% year-on-year to MYR 466, while ancillary revenue per pax hiked 11% to MYR 273 steered by significant improvement in duty free performance. ASK capacity grew 9% year-on-year to 5,612 million as aircraft utilization scaled up 16 hours driven by network optimization and longer-haul operations. Passenger load factor held steady at 82%. Passenger traffic declined 5% to 1.03 million passengers as the company had a bit of the shorter capacity, especially like Bangkok, Hong Kong, Amritsar and Perth and moved that towards longer flights, which we operated last quarter. One remaining aircraft is to be reactivated hopefully next year due to MRO backlogs and also the engine delays of Rolls-Royce. The company is expecting the inductions of also four A321LRs in 2026. TAAX posted a revenue of MYR 235.4 million. Unfortunately, a net loss of MYR 128.4 million. Unfortunately, in Thailand, as you know, they're suffering a slower market demand due to weaker tourism sentiment due to, I guess, the earthquake concerns, the border crisis and everything else, which has impacted the biggest chunk of service arrivals from China and North Asia. So back to the 3Q '25 financial highlights. Revenue, MYR 803.5 million in 3Q '25, marginally up 1% from MYR 795 million. Scheduled flights revenue marginally down MYR 479.7 million, as I mentioned earlier, basically based on few rearrangements of redeployment of traffic and also a 6% decline in freight revenue bolstered by a 5% growth in ancillary revenue. Ancillary revenue has outperformed. Net operating profit grew 4x year-on-year to MYR 12 million on the back of improved fuel environment and also stronger currency. So in Q3 '25, net profit trended at MYR 27.8 million compared to MYR 121.6 million, with substantial ForEx gain in the preceding year. Key operational highlights. ASK capacity increased 9% year-on-year to 5,612 million with aircraft utilization trending close to 16 hours per day. Passenger load factor remained at 82% and seat capacity reduced by 3%, tracking lower numbers of flights. In the last 12-month period, the company cut Bangkok, Hong Kong, Amritsar and Perth, but not to say it's cut as you look in the group whole scheme of things, it has actually been moved to AK to garner more revenue and more frequency on those flights on the shorter aircraft. And that really on a group -- it's why, it's actually a revenue upside. Review operating expense. Total operating expenses improved 1% year-on-year, lower aircraft fuel expenses despite higher consumption due to lower fuel prices, lower aircraft lease expenses due to optimized PBH aircraft utilization in the quarter compared to the same period 2024 and higher operating expenses increased to MYR 57.9 million, primarily due to additional marketing spend on new routes in new markets, strengthening presence across the network. Again, we keep putting this slide in, we just want to keep reminding people the fact that we are still remains one of the lowest cost structure in terms of airline in terms of CASK and CASK ex-fuel. It is really driven by high utilization of active fleet, prudent management of operating expenses and amidst ramp-up of operation bolstered by jet fuel and also the depreciation of the ringgit. Ancillary performance recorded MYR 280.6 million, contributing to 35% of total revenue. This is quite an impressive growth, showing a 5% increase to the same period in 2024. Ancillary per pax remained strong at MYR 273, driven by better duty free performance. This is just really showing how much a pax is spending on a flight on top of the average fare that they're paying. And obviously, the continuing upward trajectory at the back of higher revenue of travel flexibility options. People are opting for travel flexibility options on our flights and in-flight service offerings enhancing value and passenger satisfaction. Also, we have also done quite a bit of work on marketing initiatives and refined onboard offerings, resulting in steady uplift in ancillary sales. Just quickly, just to talk about TAAX. Revenue stood at about MYR 235.4 million in 3Q '25, down 22% year-on-year. Net operating loss stood at MYR 138 million, a 13% year-on-year decline on the back of higher staff costs and user charges, especially when they went into new markets and higher charter flights driving up commission fees, which they -- throughout the middle of the year, they leased -- wet-leased out 3 aircraft to another airline to do Hajj flights and also mitigated by lower fuel expenses due to lower jet fuel. Loss before tax charted around MYR 128 million due to ease-up in international tourism in Thailand and also higher ForEx. ASK capacity up 1,789 million in 3Q '25, supported by higher number of operational aircraft following additional induction into the fleet during the quarter. Higher flight frequencies also resulting in a 5% year-on-year increase in sectors flown and also, unfortunately, passengers carried reduced to 319,129 in 3Q '25 due to weaker tourism in the country. Just to talk about business outlook. As we move into the strongest quarter for us, 4Q is looking good and has set to be a very strong quarter to conclude. And we observed that forward bookings in our core markets are looking very strong, focusing on capitalizing on the peak winter, especially holiday season, markets like Japan, Korea, Central Asia is probably up for grabs and usually the loads for this are usually seasonally is very strong. China as well will be going into more of the lean season, but I think this is something that we're not too worried as the forward bookings still looks strong as China demand is slowly bouncing back very strong. Japan, Australia, South Korea retain steady, and we are focusing efforts to these markets in the coming months. Also charging up company's market presence in routes in their infancy, especially Tashkent and Istanbul to maintain visibility in the market as the markets mature. Again, fuel and foreign exchange are expected to be favourable in the next few months with Brent expected to hover around $62 per barrel in 4Q '25. Again, just to give you a bit of color on what the market and the macro side of things we are looking at. China advisory to avoid travels to Japan may have caught an upper hand of our operations as Chinese tourists pivot to our home region in ASEAN and lower tourist arrivals in Japan may serve to lower costs of travel to Japan, consequently driving up demand to ASEAN instead of Japan. Our priorities today and 2026. Network strategy as we plan complete our 2026 budget, increasing frequencies to enhance connectivity and market share, looking to new markets, improving overall OTP and building on our newly established markets, Central Asia and West Asia. And as you know, we started Istanbul and there are more to come next year. Last -- in terms of fleet growth plans, last aircraft to be reactivated early next year to meet network requirements. And as we still try our best to try and look for more 330s out in the market. We are also reconfiguring some of the 2 aircraft that we took during COVID, and that was supposed to be this year. But due to MRO constraints, we have pushed that towards next year and also exploring the four A321LRs to be inducted in 2026 to support network plans and also requirements kick starting the new era for us. Commercial initiatives, maintaining ancillary's’ stellar performance with a continuous fine-tuning of pricing and personalization and also sustaining a targeted marketing plans with focuses on boosting Fly-Thru traffic which stands at 20%. And of course, working hard with Teleport to ensure that they drive as much of their cargo revenue to increase on a year-to-year basis and also a quarter-to-quarter increase. Corporate focuses, again, you guys know this pretty well, expectations to the completion of the aviation business acquisition by end December 2025 and continuous cost optimization across the organization, ensuring lean structure throughout. As we move towards the network, we are looking into a whole scheme of things as a group. Short haul will focus on usually high-frequency point-to-point and trunk routes across ASEAN and domestic markets, utilizing the 320s and 321neos to optimize fast turnarounds and agile operations. Anchors network density, scale, brand visibility, and steady cash generation. Medium haul, which is us, we will be a network extender to connect from the short hauls to the long hauls and medium, bringing the short-haul markets to North and Central Asia, Australia and Middle East and also to bring the A321LRs/XLRs to complement the 330, which really is to go and focus on build some of the markets that the 330s are too big and also increase frequency and hopefully give opportunity to fly twice a day or also to now give us to enter the entry into markets where the secondary markets like China where the population is fairly high and also the run rate might be a bit shorter. And obviously, this unlocks yield diversity connecting traffic and network depth. A little bit of information in terms of our global destinations, you know this well. This is dish growing and growing. And again, we -- as you look at the market share, we're probably majority close to a market leader in most of the markets that we operate in, becoming the world's first low-cost carrier network, exploring hubs in the Middle East and Europe, Bahrain as a strategic gateway. As you can see, a lot of our group CEOs are hitting there to just see what we can do in terms of connecting, bringing traffic to [indiscernible] with stop in Bahrain onwards to Europe. Also narrow-body global reach, expanding yield pools while maintaining lower CASK like half and also integrating scheduling and the multi-hub operations create seamless Fly-Thru operations. So basically, the strategy is to find a mid -- hub somewhere, whether it's Bahrain or Central Asia with a one-stop connection into bigger markets. For example, we can go now from Central Asia or from Bahrain to Europe or vice versa into well down the road, not yet, but into the United States, if ever. Aviation business acquisition: Final phases. This one, as you're aware price fixing was announced, I think, about a week or so ago, and we are targeting for completion of the exercise -- AirAsia X turn into a pure-play enlarged aviation business. Again, internal targets for 2025, everything is on track, looking good. I think as we come into the fourth quarter without sounding very optimistic, I think we will probably exceed our forecast for the whole year, looking at the trends that we're going into the fourth quarter. So I think we are on track. And I think for the doubt is there, I think we're doing quite well. So again, just to ensuring we expect to achieve above targets. Seasonality, as I said, fourth quarter remains strong. Operational fleet size, I expect to have 18 operational by December and network optimization, expect to add more connection to Southeast Asia and Central Asia region and also aircraft vintage I expect to be -- expect higher aircraft maintenance checks to the fall. But again, as I explained in the last quarters, the C checks and all that, a lot of the main checks has been done towards last year and the year before. I think more this year is more towards the minor C checks that usually will take about 2 weeks, and that will be out. So we don't see much disruption in the fleet as we speak. Other than that, appendix is just a 9-month snapshot. And thank you very much, everybody, and we can just go to Q&A.

[Operator Instructions] I think we can start with first ASK on the chat box. Ben, I noticed the group's unrecognized share of TAAX losses. Just wondering, are there any plans for TAAX, especially after the short-haul corporate exercise?

At the moment, I think, as you know, the unrecognized losses has increased with the losses that they posted in 3Q. But at the moment, there is no plans. They are reviewing their network as we speak because it's been a tough market. I think you wait -- I think TAAX has been -- the Thailand has been very active. So they may look at optimizing their fleet to see where they can fly best to make money. So at the moment, it's just more about trying to fine-tune their 2026 network.

Matthew, you can unmute and speak your question.

Just I got a few questions. Firstly, could you provide some color on the forward booking load factor for the fourth quarter? Should we see like an increase on the 82%.

Yes. I mean I think the -- it should be, I think we're -- without giving you too much guidance, it looks very -- it looks -- it will be higher. And obviously, the fare generally, fourth quarter will also be higher. So yes, looking strong.

My second question is, how has the route to Istanbul and Tashkent been performing in terms of load factor in the third quarter? And maybe also provide some guidance towards in the fourth quarter?

Tashkent is okay. It's been a slow burn for the first 1 month, but going into December looks fairly strong. So it looks okay. For Istanbul, we didn't operate it in third quarter. We only operated in the fourth. We only started in November. So it is going as planned, but a little bit more work that needs to be done out of Malaysia. A lot of the traffic is coming from Istanbul. If you look at the passenger split, 60% or actually 65% is POS -- or sorry, you know what I mean, point of sale Istanbul, while 35% is point of sale Malaysia. So we need to build out a bit more presence in Malaysia and also the region to fly out there. But looking -- heading into December, it's as expected into our forecast. We are very conservative on our forecast for the first few months. I think not a lot of people know about Istanbul yet, but we're trying hard to try to market that more.

Is there a number on the load factor so far? Are you unable to...

I have the number on the load factor, but I won't be sharing that.

I see right. Maybe third question, maybe drilling a bit more on the recent cancellation of flights between -- from China passengers to Japan. Are you able to provide us like the quantum of an increase in passenger bookings between Malaysia and China and maybe also [indiscernible] in China?

I mean without coming to -- I mean, at the end of the day, I mean, that is something that is unfortunate. I mean we want to make sure that people fly out of China to go to everywhere. But I think with the tension that is between the 2 countries, a lot of people are moving towards Southeast Asia and ASEAN. And also, we are also a beneficiary also of the spillover of people avoiding Thailand as well. So you get that double whammy in those 2 markets coming to us, it's actually a positive sign. You look into our China loads, it's actually exceeded expectations when we thought that the third quarter will be very, very light. That has done very well for us now. So we hope that continues on. But obviously, as a group-wide, I have to make sure also that TAAX and all the other entities who are suffering from it, they need to make sure they build more marketing to build those traffic and to ensure passengers that [indiscernible] go up. So on that side, I'm happy with the performance of China.

Is it generally higher than the 82% load factor?

Yes.

All right. Do you actually see a recovery between completing China and the Thai routes? for TAAX?

Sorry, get again?

Do you see a recovery in between China and Thailand routes on TAAX side?

I'm not close to it. I'm not close to the numbers, but what I'm saying -- what I see just based on their performance on the high-level top line numbers, it's still where it is. It hasn't really improved.

Even on the forward booking numbers in the fourth quarter.

October went up a little bit because of Golden Week, but that's just a one-off [indiscernible].

I see. And just lastly before I jump back in the queue, is there a time line on your establishing of your Middle East hubs?

No. Probably next year. We're just fine-tuning our budget. So potentially out of it will probably be one destination that we'll look at from one stop through Middle East. I mean giving guidance. So I think we -- yes, we have no problem. I think we will exceed -- and specifically our strongest quarter as I gave guidance this time for the lowest in the fare and we're on the right track.

Hi, Daniel.

We had a presentation [indiscernible] you ask me?

[indiscernible]

Yes. I mean the others is basically...

It's 4%. Yes -- but others [indiscernible]

Duty free has gone up quite a bit.

How much [indiscernible] How much percentage?

[indiscernible] what the numbers?

Daniel, inside the others, it's everything else, right, apart from what you see seat meal and baggage. So you've got your insurance is inside your duty-free prebook on board, those are all inside. And then all your cancellation fees, your administrative fees, everything else under the sun is inside. If you want like the breakdown, I can share to you afterwards.

A lot of it is driven by duty-free. Duty-free actually has done quite well. And also in my monthly review with commercial [indiscernible] insurance in terms of take-up also has actually jumped quite high. So there's a lot more people taking travel insurance flying with us, which is with us.

Okay. Question is now that Thailand has this issue. So how does it affect your operations?

Which operations? My operation for Malaysia or in terms of Thailand?

Thailand.

I don't fly to Thailand.

[indiscernible] Thailand.

Yes, yes. So, so far, it's business as usual. So they don't fly to Thailand. They are out of Dong Wang. So they go to those markets. So far, it's -- I see the weekly updates and the safety review. I don't see any delays out of -- due to flight there.