AirAsia X posts record annual profit despite forex hit

AirAsia X Bhd reported a record profit in 2016 as more people took to the skies, but results fell short of analysts' estimates as volatile foreign exchange markets dragged earnings down by a whopping 80 percent in the fourth quarter. The airline expects its prospects to remain positive based on current booking trends, but said the depreciation of the Malaysian ringgit remains a key concern as a large portion of the company's borrowings and operating costs are denominated in US dollars.
Previously, the airline saw the weaker ringgit, which has taken a beating over the past two years, as a boon because it made Malaysia a value-for-money destination among travellers, increasing passenger traffic.
AirAsia X chief executive Benyamin Ismail said in a statement late Wednesday the company will look to reduce the impact of foreign exchange rates by intensifying sales from stronger currency markets such as the Australian dollar to offset US dollar bills.
"As we foresee the industry's challenging environment persisting owing to currency volatility, the management will continue to look for avenues to mitigate forex risk via hedging," he said.
The airline has already added capacity in Australia and is increasing frequency on other routes where demand is high to shore up its results, having been in the red for the past two years.
Last month, the airline said it had become Asia's first low-cost carrier to receive approval to operate scheduled passenger flights to any US destination. It is considering flights to several US states, including Hawaii.
Benyamin said the airline was also looking to cut costs.
AirAsia X posted a net profit of 39 million ringgit ($8.8 million) for the October-December quarter, lower than the 197.4 million ringgit recorded a year ago. For the full year, profits came in at 230.5 million ringgit, versus an average estimate of 236 million ringgit from ten analysts polled by Thomson Reuters.
Revenue rose 39 pct to 1.17 billion ringgit ($263 million) for the quarter, versus 841 million ringgit in the same period last year.
The airline reported a 40 percent year-on-year growth in the number of passengers carried.
In its operating statistics, the airline said its passenger load factor for the final quarter fell 2 percentage points to 81 percent from a year ago, but passenger traffic jumped 40 percent to 1.38 million.