AirAsia X Berhad (AAX) Earnings Call Transcript & Summary

Everyone, good evening. Thank you for joining us. Online, we have Ben [Technical Difficulty]. Over to you, Ben.

Hi, everybody. First of all, I just want to say I apologize for the delay. We were just waiting for the final copy to be uploaded into Bursa. I think that has been filed. So, they finally uploaded it. So bear with us. So let me go through the [indiscernible] for the quarter and full year-ended 31st December 2024. Key takeaways: revenue crossed the MYR 3 billion mark at MYR 3.2 billion for the full year-ended 2024, mainly driven by the growth in passenger numbers and impressive ancillary revenue performance at MYR 253 per pax. 4Q '24 trended at about MYR 872.3 million, up 6% year-on-year. Total operating expenses were up 4Q '24 and FY '24, mainly driven by higher maintenance and overhaul costs, following fleet reactivation and operations run-up, mitigated by lower jet fuel and a stronger ringgit. EBITDA surged by 74% to MYR 119.6 million in 4Q '24 compared to MYR 68.7 million in the previous year due to lower aircraft fuel expenses and also aircraft lease expenses that exceeded the PBH arrangements. EBITDA FY '24 lower by 30% year-on-year at MYR 461.2 million due to reversal of provision resulting in positive [ OpEx ] in FY '23. The full year net profit stood about MYR 229.1 million and 4Q '24 net profit recorded at MYR 22.6 million, a good set of numbers. CASK improved to MYR 0.1299 in 4Q '24 compared to MYR0.1571 in 4Q '23 with lower fuel expenses and improved capacity utilization, following a 26% growth in ASK capacity during the quarter. We still remain the lowest among our peers with CASK at about USD 0.0296. During the quarter, average base fare was at MYR 496 as capacity returns in the markets, while ancillary revenue per pax remained strong at MYR 268. Full fleet reactivation and arrival of additional aircraft expected in 1 half '25, strategically enhancing network and optimizing operations to meet growing demand. Our Associate, Asia X Thailand, recorded a revenue of MYR 469.1 million in 4Q '24 and MYR 1.7 billion in 2024, with net operating profit standing at about MYR 42.7 million in 4Q '24 and a net profit at MYR 56.3 million in 2024. And this is mainly made due to the strategic relocation to Don Mueang International Airport in October '24. Finally, we secured shareholders approval for the Capital A Berhad's aviation business in October '24. That's still work in progress, but this, again, is gearing up for future opportunities in a promising market landscape as we work to complete the exercise. Key financial highlights: scheduled revenue increasing 22% year-on-year to MYR 2 billion in FY '24 as more aircraft returned to operations in the post -- in the past 12 months, driving passenger take-up. 4Q '24 scheduled flights revenue is marginally lower year-on-year at MYR 530.1 million as fare was adapted to increase capacity in a wider market. Again, ancillary surged 49% to MYR 1 billion and 31% year-on-year to MYR 286 million in 4Q '24. Ancillary RPP impressive at MYR 254, and MYR 268 in '24 and 4Q '24, respectively. Freight services revenue rose by 11% year-on-year and 23% year-on-year to MYR 52.1 million and MYR 186.4 million in 4Q '24 and FY '24, respectively. Our EBITDA trended at about MYR 119.6 million in 4Q '24, up 74% due to lower aircraft fuel expenses and aircraft lease expenses as aircraft exited the PBH arrangements. And of course, our full year '24 [ stellar ] EBITDA at about MYR 461.2 million against MYR 661 million in FY '23 due to reversal of provisions in [ 2020 ], resulting in a positive operating expenses. Net profit remains positive, charted at about MYR 22.6 million from MYR 27.4 million, weighed by ForEx losses recorded in this quarter. On a full year basis, net profit performance is really good at about MYR 229.1 million. Operational highlights: number of passengers carried grew by 20% year-on-year to 1.1 million passengers in 4Q '24, driving a full year number of passengers carried to about 4 million passengers [indiscernible]. Load factor trending at healthy 82% and 83% in 4Q '24 and [ full Y '24 ] shows that the demand remains strong and sustainability remains high. Sectors flown grew by 19% and 35% in 4Q '24 and FY '24, driven -- really driven by the boost in ASK capacity as we get more planes back into shop -- sorry, back into service and network expansions of new routes and ramp-up of popular routes in the months of 2024. Total operating expenses, just usual increase in maintenance and overhaul due to reactivation of aircraft and aircraft scheduled checks. Lower aircraft lease expenses, as we currently ended our PBH program. So there will be reclassification. And of course, lower aircraft fuel expenses, despite higher fuel uptake due to lower fuel price. Total operating expenses stood at about MYR 2.8 billion, up 33% compared to MYR 2.1 billion, again, driven by ramp-up in operations and reversal of provisions. As we spoke earlier, we still remain the lowest in the industry. [ Of course ] high utilization for our 330 body at about 15 hours per day, and we still keep to our mantra of making sure that we remain low cost, high quality at all cost. Prudent management of operating expenses, and also further bolstered by the stability of the Malaysian ringgit, which is good, from the preceding year. Ancillary performance rose 31% to MYR 287 million in 4Q '24. Again, ancillary RPP, impressive at about MYR 254 and MYR 268 in 4Q '24. Again, high capacity and passengers carried have really contributed to the increase in ancillary, and also value-driven initiatives driving sales through its ongoing refinement of offerings. Just to break it down a bit into the different ancillaries, as usual, our star performance [indiscernible] seat was up 10% on the back of increased passenger carried. In-flight meal, as we come up with better and more sustainable food, in-flight meal went up 5% year-on-year, while baggage up 34% year-on-year. Just a bit on TAAX, revenue chartered about MYR 454 million in 4Q '24, while MYR 1.7 billion in FY '24. And also, net operating profit at 4Q '24 and FY '24 stood at about MYR 42.7 million and MYR 30 million, respectively, compared -- lower compared to the previous year due to high operating expenses environment. Net loss recorded at MYR 8.2 million in 4Q '24 due to the end-of-period adjustments, while full year reported a net profit of about MYR 56.3 million. The ASK capacity grew by 26% in 4Q and up 16% year-on-year. And again, they are similar to us. The increase is due to the operational aircraft being back to the business of its 10 aircraft by December '24. Also, they've increased destinations, along with flight frequencies, leading to the growth of sectors flown to 1,653 in 4Q '24 and 5,308 in FY '24. The number of passengers carried charted about 1.6 billion (sic) [ 1.6 million ] passengers in FY '24, an increase of 21% compared to the preceding year. In 4Q '24 alone, TAAX carried a lot -- total of 463.63 (sic) [ 463,463 ] passengers. I think there's an error there in terms of 1.6 billion passengers, but we'll fix that up. Passenger load factor stood at a healthy 83% for the year 2024, maintaining year-on-year comparison due to the increase in seat capacity within the year. Our network now serving 22 routes in February 2025; more flights into China and the launch of Chongqing and Nairobi, marking its maiden venture to Africa, and also more prospects in South Asia and Central Asia in 2025 as we trail the success of Almaty. The focus on strengthening our connectivity and rebuilding frequencies driving up FlyThru traffic, which is now about 20%, bridging and leveraging the wider [ Asia ] network. Expand connectivity between China, South Korea, Japan, India, Australia and up to Eastern Europe through Kazakhstan with tourist favorites, example, Bali, Phuket, Penang and Langkawi. Immediate outlook: first is just making sure that we enhance our network across more regions where connectivity is limited and to find demands that are high and profitable. Rebuilding capacity for the year and still focus on core markets, especially in Japan, Australia, and also to find new markets similarly to Almaty, where it's untouched. Fleet plan focuses on the last leg of fleet reactivation, along with induction of additional an aircraft by first half '25. One [ left off with RTS ] comes live hopefully by April, and we've got another aircraft coming just a month or so after that. Also anticipated promotional activities in the near future. Ancillary revenue projected to grow further, as well as improved offerings aligned for fine-tuned pricing and personalization strategy. Also, cargo has been a key driver as it sustained momentum with Teleport. As we can see, there's a lot of new capacity and cargo belly through new routes, especially Nairobi that has been a success for us. Corporate focus areas: we're still engaging with CAP A in the progress of company's growth ambitions for years to come, securing shareholders' approval for the proposed acquisition. That's still on the way. We're on the tail end of it. Fundraising, pretty much close to finalization and just waiting for further approvals. Next page, this is internal targets that I think the group has decided to be disclosing. I guess, we are the first entity to be disclosing the internal targets, while CAP A, later, when they release -- that they will be doing [indiscernible] as well. These, just to be sure, are just internal targets internally that we set to give some confidence to the market and what we're going to plan to do for 2025. Revenue target is ranging from MYR 3.5 billion to MYR 4 billion; EBITDA, MYR 0.5 billion to MYR 0.55 billion; and net op margin, 4.5% to 5.5%. So again, the assumptions are there. But again, this -- as an analyst, you got to be sure that you [ sensitize it ] when the market moves. It could be currency and it could be fuel, et cetera, et cetera. Again, assuming some of the assumptions: seasonality, AAX expects its first and fourth quarters to be buoyed by peak holiday season across the regions, and second and third quarters to be supported by localized travel and holiday peaks in the tiny markets that we operate, summer peak in Almaty. Operational fleet [ size ]: we expect 19 aircraft by first half '25. But again, that's the plan. Network optimization, AAX expects to add more connections to South Asia and Central Asia region during the year, and this is being executed with profitability as key. And as the aircraft gets older, I do expect checks as we go through the system. But again, aircraft maintenance will come due in years to come and quarters to come. Just to highlight to people what the strength [indiscernible] AirAsia [ within ] AirAsia Group, 22 to [ 155 ] destinations; hubs 2 to 15; routes 22 to [ 339 ]; unique routes 8 to 105. I think that's really the gold mine for us. 105 [indiscernible] flies, while the passengers -- 6 million to 90 million passengers. Again, market share remains strong in Malaysia, Thailand, Indonesia, Philippines, and Cambodia follows as it is. Again, thank you very much, everybody, for joining us for our 4Q and full year results. Let's just open up for questions and Q&A. I know you guys have to rush to the CAP A call soon. So let's make it quick and sweet. Thank you.

Just a quick one. In guidance, what is the airfare you're expecting for...

[indiscernible] I think what we've given you already is more than we usually do. I think you can pretty much work really that backwards.

Okay. Because quarter-on-quarter, the airfare is seasonally strong, right? But looking at year-on-year, the airfare is coming off. How you look at that? Can you kind of like give us a bit of color on the airfare trends for the next full year?

I think we spoke about this on every call. I can say -- I mean, to be honest, I think we said this 2 quarters ago, I actually said I was very bullish on China, but China has slowed down a bit. I think just due to demand coming out of China -- I think, as you know, people are just pushing out travel for the locals to do domestic travel. We've seen slowness in that. But on the opposite side of things, our Japan, our Korea, our Almaty has rocked the roof, and that's something different, right? So, as Almaty started, we've already increased fare up to 35%. That has improved considerably. Japan remains strong. Australia, fourth quarter was really strong for us. So it's tough. I think the key markets will remain where it is. The only thing that I don't have color is China, but we'll see how that goes.

So can you remind us how many percentage of your routes is to China destination?

About 15%. Any other questions, guys? All good.

[indiscernible]

Give me a sec. The [indiscernible] No, I think the key thing is, first is, we're assuming an improvement in load factor, which is one. And I think the other one is really the reactivation of 2 aircraft. We now have 17 planes actively flying, 16 to 17, depending on when it goes to checks. But if you look into the full year of next year -- sorry, this year, there's one plane coming out in April, which I think we're quite confident, and also another one coming out a month after that. So, that generally will contribute to more passengers moving forward, and also an improvement in also generic day-to-day load factor of our current operations.

[indiscernible]

Yes, correct.

Just curious, on your guidance, how many planes are actually going -- undergoing the high maintenance checks? Is it the [indiscernible] checks?

When? You're talking about this year or last year? This year or next year?

2025.

There's a lot. Actually, we have 13 checks. 13 planes are going in this year. On top of that 13, we have 3 planes going for landing gear reconfiguration, so yes, around that. So quite a bit. So I can safely say that at any time of the month, there is at least 1 aircraft in hanger.

[indiscernible]

Yes. I think, to be fair to them, they only got their approval for 330s this year -- not this year, I think towards the end of last year. So they are doing our first -- they're doing their first maiden 330 induction now. So that's the one that is coming out in April. But to answer your question, not all is going -- all our 13 C checks are going to ADE because they also have a pipeline of 320s in the shop. So we are spreading the risk across. Some are going to LTP in Philippines, some are going to Indonesia, and some are going to Singapore -- no, some of them are going to Guangzhou.

[indiscernible]

Yes, correct. FY '24 number includes the profit sharing portion, yes.

Just to follow up on the profit sharing, how much was recognized in the fourth quarter?

We have already made adequate provision as at 2023. So when we have assessed it, it is still sufficient.

It's still sufficient. How much of...

Yes. We made a provision of about MYR 35 million.

In the fourth quarter alone?

No. In last year, we've already assessed. We've already pre-forecasted the profit sharing that's required over the next few years, and we have already [ present-valued ] it back to current.

To current back in 2023. So 2024, nothing was recognized?

No additional provision was made, yes. We already put it on the balance sheet.

[indiscernible]

I would say, the maintenance -- the reactivation for 1 aircraft, we're looking at about, I'd say USD 10 million.

We share partially with the lessors.

Yes. And also that all cost doesn't go to [indiscernible]. It goes to also the lessors as well. They bear, I would say, about 30%.

[indiscernible] Sorry. For the MO, cost should be -- could you guide as to will it be higher, flattish or lower year-on-year for [ FY '25 ]?

It's very difficult to judge that. This year is considered very high because, as you know, the aircraft, as we get older, there's more checks coming in.

Flight hours.

Yes, more flight hours, and also it's based on calendar hours and flight hours. So therefore -- and also the vintage of the aircraft is about the same among all the aircraft. If you're going to guide for next year, I would say next year, only there will be typical 5 C checks only and no landing gear change. So you can see a drop of about 50% for next year. Okay. Any more guys? Okay. If there are any questions, I think you can contact the IR team. I can simply say thanks very much for joining guys. Those reactivations seem to drop this year. No, what I meant is the reactivation...

[indiscernible]

No. The first thing is, there will be a drop next year when we do -- our aircraft going out. This year, to clarify the maintenance line that you see -- for this year?

[indiscernible]

To clarify, reactivation [fee], 50% drop this year? No. For the 4Q. It's only for the 13 C checks this year, right?

Next year.

Next year, [ end of '24 ].

Yes.

[indiscernible] for the '25...

For '25, yes.

[indiscernible] So correct. So basically, this year, in the 2025 -- just to clarify, 2025 numbers, your C checks will be based on 13 aircraft going for C checks and 5 landing gear change, while in 2026, that number will drop by 50%. Got it? All right guys, thank you very much. Thank you for your call, and we'll catch up again some other time.