AirAsia X reports wider Q3 loss on higher fuel cost

Malaysia's AirAsia X Bhd reported a sharply wider third-quarter net loss on Wednesday, the airline's second consecutive quarter in the red due to higher fuel prices. Volatile fuel costs have been a significant pressure on the long-haul budget offshoot of AirAsia Group Bhd, and analysts expect that will continue to be a challenge for the airline's expansion plans.
The average cost of fuel in the quarter was 40 percent higher than in the same period a year earlier, the airline said. The airline said in a bourse filing it was working to mitigate the increase by boosting ancillary revenue and capacity. "A new fares structure has been implemented and the company is actively driving up ancillary revenue, which will ultimately improve yields, while Management also remains focused on monitoring operating expenses to achieve better cost efficiencies to offset uncertainty in fuel price," it said. Group CEO Nadda Buranasiri said the airline also expected provisions for doubtful debts to put short-term pressure on full-year earnings.
AirAsia X posted a quarterly loss of 197.5 million ringgit ($47.10 million), compared with a net loss of 43.3 million ringgitt in July-September last year Revenue fell 4.2 percent to 1.08 billion ringgit on lower fares. AirAsia X said its average passenger fare reduced 5 percent compared with a year earlier.
The airline also noted slowing tourism, especially from China, which currently contributes a quarter of its total revenue. In response, it is shifting some future capacity into other core markets such as Japan, South Korea and India. AirAsia X's Malaysian arm cut capacity by 4 percent in the third quarter as it ended flights to Tehran and switched some capacity from Australia to North Asia, the company said.
Its load factor, a measure of seats filled, rose 1 percent to 80 percent in the quarter. AirAsia X also has smaller offshoots in Thailand and Indonesia, giving it a total fleet of 32 A330s, which it plans to increase by two aircraft this year. AirAsia X did not provide further information on the potential switch under consideration of some of the 34 Airbus A330neo widebody planes it has on preliminary order to A321neo narrow bodies that would help the airline in smaller markets or off-peak seasons.