AIRASIA X, the long-haul arm of AirAsia Group, is expected to record a core net loss of RM73 million in its third quarter financial result compared with a modest RM16 million profit in the same period last year.
The expected loss would be due to several factors, according to a research report by Maybank Investment Bank Bhd (Maybank IB).
These include lower yields by five per cent year-on-year, given the weak markets and also the impact of new route launches.
Maybank IB added that the loss would be due to an increase of unit cost by 3.8 per cent year-on-year, due to lower aircraft utilisation and its forecast of a 1.8 per cent year-on-year decline in average stage length.
The second half of this year (2H14) has been a seasonally strong period for AirAsia X and this was where the airline historically derived all of its annual profits from, Maybank IB said.
“However, things have been challenging in 2H14 and the published fares suggest continued weak yields. Despite all the rhetoric on Malaysia Airlines’ plans to cut capacity, we see no evidence as such and the fare war is pretty much still rife,” the bank-backed research firm said in its note to investors yesterday.
AirAsia X’s load factor from July to September this year or in its third quarter fell 1.7 percentage point to 80.6 per cent from 82.3 per cent in the same period last year.
However, the airline did carry more passengers in the three-month period as the number of passengers rose by 24 per cent to one million from 843,693 in the same quarter a year ago.
According to Maybank IB, the yield environment for the long-haul segment remains distinctively weak and it coincides at a time when AirAsia X is taking a record number of new aircraft deliveries and launching many routes.
“Furthermore, the recent weakening of ringgit against the US dollar may result in record forex translation losses in fourth quarter this year and sink AirAsia X’s capital base to an all-time low,” the research house added.
AirAsia X will receive eight new aircraft next year. During the third quarter, it took delivery of one A330-300 on operating lease, bringing its total number of A330-300s to 21 as well as two A340-300 and one A330-200 (which will be returned by end-2014).
Maybank IB maintained a “sell” call on AirAsia X, with a target price of 62 sen as it tweaked the airline’s earnings forecast.
The airline’s share price inched one sen higher to close at 77 sen on Bursa Malaysia yesterday.