AirAsia targets RM1bil cash reserves (thestar)

AirAsia targets RM1bil cash reserves
By DANNY YAP

Budget carrier sees RM500mil proceeds from private placement

SEPANG: AirAsia Bhd, which is looking to raise about RM500mil from the private placement of 20% of its share capital, is targeting RM1bil cash reserves by year-end.

Group chief executive officer Datuk Seri Tony Fernandes said the RM1bil cash to be raised might or might not include the RM500mil from private placement, which the board approved yesterday.

“The RM1bil cash reserves will be achieved from various activities that include improving efficiency, increasing seat load factor and other expenses wherever possible,” he told a media briefing after the company’s AGM and EGM yesterday.

Fernandes said the fund raised from the private placement would be used mainly to reduce the airline’s gearing and help restructure its finances.

An analyst with TA Securities said post-private placement, AirAsia’s gearing ratio was expected to fall to 2.7 times from 3.7 times now, which is a key concern among investors on the stock.
A filepic shows an AirAsia aircraft at KL International Airport. Datuk Seri Tony Fernandes (inset) says the budget airline plans to raise funds to reduce its gearing and help restructur e its finances — AFP

On the airline’s fuel-hedging strategy, Fernandes said: “AirAsia is currently on spot fuel buying, which is now proven to be the right decision, and we’ve managed to unwind our fuel derivative contracts.”

On why the board did not equity-account the airline’s share of losses in Thai AirAsia Co Ltd (IAA), Fernandes said it was the advise given by auditor PricewaterhouseCoopers.

AirAsia deputy group chief executive officer Datuk Kamarudin Meranun said the company had wanted to equity account the losses of IAA into its books.

“But we were advised not to do so by our auditors as there were still some outstanding issues then relating to IAA’s former stakeholders Shin Corp and later Temasek Holdings,” he said.

On AirAsia eating into Malaysian Airlines’ market share, Fernandes refuted the claim. “We have not done so. In fact, we have opened up new routes to allow more people to fly at budget fares never done by any other airlines.”

On the dispute with Malaysia Airports Holdings Bhd over various outstanding charges, Fernandes said: “We are hopeful that the issue will be resolved in two weeks.”

Asked about AirAsia’s performance going forward, he said: “We expect to be profitable this financial year, which goes to say a lot for us, when most other airline companies are making losses in these challenging times.”

He also said AirAsia’s second-quarter results (which are soon to be announced) should be reasonable.

The budget airline recorded a net profit of RM203.15mil in the first quarter ended March 31, up 26% from RM161.28mil in the previous corresponding period.

Air Asia X owes me a Sweet Snack and Beverage (thestar online)

Air Asia X owes me a Sweet Snack and Beverage
Posted by: yuilui
I recently flew with Air Asia X (D72009) from London to Stansted and had pre-booked my meal (Kid's Meal) to take advantage of the discount on pre-booked meals. I was served the Kid's Meal as expected, but was pleasantly surprised when during the 2nd service, I was not given the "sweet snack and beverage" that I should have been given. When asked about this, I was explicitly told by the air stewardess that the 2nd service Kid's Meal does not come with ANY sweet snack and beverage. However, she was kind enough to pour me a cup of water to quench my thirst (it was a 13 hour flight after all).

I would like to bring your attention to the Kid's Meal itinerary that is detailed out on the Air Asia X website, as well as in the in-flight food menu book.

Kids Meal - UK to KL
=====================
1st Service (Main Meal)
Penne Pasta with Chicken Bolognaise*

2nd Service (Light Meal)
Chicken Nuggets & Potato Wedges*

*Kids Meals are accompanied with a sweet snack and beverage.

As you can see, the asterisks denotes that the 1st service and 2nd service meals are supposed to come with a sweet snack and beverage. I would like someone from Air Asia to explain to me why I was not given a sweet snack and beverage in the 2nd service. The menu clearly states that it is accompanied with a sweet snack and beverage for journeys from the UK to KL.

Here are some of the excuses I do not want to hear :
1) The sweet snack and beverage have all been combined into 1 and served in the first meal.
2) You ran out of sweet snack and beverage after the 1st service.
3) Do not tell me that the 2nd service Kid's Meal does not come with any sweet snack and beverage, because unless I am blind and imagining asterisks where it shouldn't be, it does.


I Want my Sweet Snack and Beverage

Also, I noted that all the other passengers given the Kids Meal on the same flight did not receive any snack and beverage during the 2nd service. You should know that the Kid's Meal is MORE EXPENSIVE than a regular meal, and to be served a miserable polystyrene cup of water as opposed to a bottle of mineral water which normal meals have in the 2nd service is unacceptable to me.

I am not a kid, and am not throwing a tantrum :-). I just want to know what's going on and feel strongly that other consumers not be misled by your website or inflight menu. I would also love to have a refund, or for the sweet snack and beverage to be delivered to me.

Airlines tighten baggage rules to help trim costs (thestar)

Airlines tighten baggage rules to help trim costs
By YEOW POOI LING

IATA says every 1% improvement in fuel efficiency across industry can cut fuel costs by US$700mil annually

PETALING JAYA: Most airlines, in trying to mitigate the impact of fuel price volatility, have resorted to stringent baggage restrictions as part of measures to achieve better fuel efficiency.

According to the International Air Transport Association (IATA), every 1% improvement in fuel efficiency across the aviation industry can lower fuel costs by US$700mil annually. This is unsurprising since fuel cost is the second-largest cost for airlines after labour.

Passengers on AirAsia flights are encouraged to travel light, like using carry-on luggage, to minimise checked-in baggage. They are allowed to have one carry-on luggage of up to 7kg, plus free 15kg allowance for checked-in baggage.

In comparison, Malaysia Airlines (MAS) allows for hand luggage to have a maximum combined weight of 5kg and free 20kg allowance for checked-in luggage for economy class (see table).

MAS general manager for corporate safety, security, health and environment, Ooi Teong Siew, said reducing weight was one of the static techniques, which include ensuring aircraft are well trimmed and engines cleaned regularly.

Dynamic techniques, meanwhile, are factors that have an impact on the flight path like direct routings, economical speeds, continuous descents and optimum altitudes.

“These efforts, without compromising on safety and quality, have reduced our fuel burnt rate and enabled us to contribute to cost reduction of RM2.3bil from 2006 to 2008,” Ooi said in an e-mail reply to StarBiz.

AirAsia Bhd group chief executive officer Datuk Seri Tony Fernandes noted that for every flight hour, an additional 1,000kg of take-off weight would burn up 90kg fuel.

AirAsia also achieved greater fuel efficiency with its new fleet of A320 planes, as they offered higher unit fuel consumption per flight while high dispatch ability and operational efficiency contributed to lower maintenance expenses, Fernandes said.

“We adhere to a quick turnaround of 25 minutes, which leads to high aircraft utilisation, lower costs as well as greater airline and staff productivity. Fuel consumption-wise, the quick turnaround means less time spent by an aircraft idling on the ground, which reduces unnecessary fuel consumption and harmful emissions,” he said.

Such practices kept costs down and ensured minimum aircraft weight, Fernandes said, adding that savings and benefits would translate into low fares for passengers.

Ooi said MAS also minimised the use of auxiliary power unit on ground, ensured faster connection of ground power, chose the best flight profile as well as adopted a continuous descent approach at applicable airports, and regular airframe and engine maintenance.

“Other examples include replacing the heavy unit loading devices with those which are 40kg lighter and using nearer alternate airports.”

MAS is anticipated to achieve greater fuel efficiency when it takes delivery of 35 B738 late next year and the A380 in 2011.

Meanwhile, FlyFirefly Sdn Bhd managing director Eddy Leong said the airline did not practise overzealous efforts in enforcing one hand luggage and checked baggage limits.

“Firefly’s business model was designed to be light from the beginning because we chose a very fuel efficient and modern ATR72-500 aircraft,” he said.

The focus then is on eliminating hassles, enriching the travel experience and optimising costs.

“For example, our full complimentary food and beverage on board includes serving muffins on paper cups and ensuring that we cater exactly to the passenger count. Any extras would be given to passengers.

“In the end, there is no waste to offload, no wastage to worry about. Our ultimate gain is in the revenue side and loyalty from passengers,” Leong added.

Emirates Airlines, in contrast, increased the free baggage allowance across its network effective May 4, with the exception of countries that apply one-piece concept for checked-in luggage.

Economy class travellers are now given 30kg from 20kg previously.

An analyst with a local brokerage said the impact of strict baggage terms was unlikely to have a huge impact on bottomline.

Airlines also tried to carry the correct amount of jetfuel and to power planes by ground power units during waiting periods instead of jetfuel to achieve better fuel efficiency, he said.

IATA, on its website, indicated efforts being taken with air navigation service providers, air traffic controllers, airlines and other key stakeholders to save one minute per flight via better airspace design, procedures and management.

“If successful, this initiative could reduce total industry operating costs by over US$1bil a year and significantly reduce environmental emissions,” the association said, noting that on average, airlines spent US$100 per minute per flight in total operating costs.

Reduced gearing for AirAsia (thestar)

Reduced gearing for AirAsia
By LEONG HUNG YEE

Move to part-defer taking delivery of aircraft in 2010 should lower debt obligations

PETALING JAYA: AirAsia Bhd’s decision to defer taking delivery of eight Airbus A320 aircraft next year is expected to bring its gearing level down, say analysts.

AmResearch views the development positively, saying AirAsia would manage to avoid building up significant capital and finance costs in its books over a soft phase in passenger demand cycle.

The research house said the move would also lift the market’s previous concerns on AirAsia’s aggressive expansion plan amid a weak demand environment, which could have resulted in a mismatch between slowing earnings growth and escalating costs.

“Assuming the deferral were to materialise, we will lower our net gearing forecast to 2.7 times from 3.1 times in 2010 and 2.8 times from 3.6 times in 2011 – extending out the gearing up cycle over AirAsia’s growth phase.

“Due to earlier assumptions of poor load factors, the elimination of depreciation and finance charges actually raise our net profit forecast by 9% to 16% to RM537mil in financial year ending Dec 31, 2010,” AmResearch said.

On Monday, AirAsia said it was planning to defer taking delivery of eight A320s for 2010 and may defer taking delivery of another eight aircraft in 2011.

The low-cost carrier was originally scheduled to take delivery of 24 aircraft next year and another 24 in 2011.

OSK Research analyst Ng Sem Guan said the deferment could help the airline lower its “relatively high” gearing level.

“Although AirAsia announced a proposed private placement recently, its gearing remains a concern,” he said, adding that the deferment reflected the less-than-exciting outlook for the carrier.

“We think the deferment suggests that the outlook for the carrier is tougher than expected. The rebound in crude oil price and the fact that the company has unwound all its fuel hedge positions may pressure operating costs. This prompts us to revise downwards our FY10 earnings by 15.5%,” he said.

However, Ng said AirAsia’s on-going fund raising exercise might provide some excitement for its share price performance.

ECM Libra Investment Research said although the deferment of delivery of the eight aircraft next year might cap earnings for 2010, it would help lighten the the group’s debt obligations.

“AirAsia’s gearing level is expected to be five times in FY10. However, the deferment of the aircraft delivery will reduce it a little to a gearing level of about 4.3 times. We also expect its cash balances to improve in FY10 as a result,” it said.

The research house said it was less concerned about the earnings opportunity cost and was more positive about the effects the deferment would have on AirAsia’s balance sheet.

Asian carriers seek to delay deliveries (flightglobal)

By

Two major Asian carriers - AirAsia and Air India - are looking to defer delivery of airliners.

The former says it is due to capacity issues at its Kuala Lumpur hub, while the Indian carrier is mulling the move due to its poor financial state.

Malaysia-headquartered low-cost airline group AirAsia plans to delay eight of the 24 Airbus A320s it is due next year.




The delivery slip is being sought because of airport terminal space limitations arising from the delay in getting a new low-cost carrier terminal at Kuala Lumpur international airport, says the airline.

It is unclear if the deal has been agreed with Airbus, or how far back the deliveries have been pushed.

According to Flight's ACAS database, the group has 115 A320s on order. It currently operates 76 aircraft - mostly A320s - and will phase out its remaining Boeing 737-300s next year.

AirAsia has complained that the current low-cost carrier terminal at Kuala Lumpur is too small. The government has announced that a new one will be built, but it is unclear when it will be completed.

Meanwhile, Indian civil aviation minister Praful Patel has warned the country's parliament that the "rescheduling or cancellation of future aircraft deliveries" is one of the measures that Air India plans to adopt to "improve its financial position".

The loss-making flag carrier is seeking to restructure its business in order to get financial aid from its owner, the Indian government. It is seeking an equity infusion of Rp12.31 billion ($254 million) and a soft loan of Rp27.5 billion that will be repaid over 15 years.

It has taken delivery of 50 of the 111 Boeing and Airbus passenger aircraft ordered in 2005. As a result, its debt swelled to Rp152.41 billion in June after paying for new aircraft.

Patel, who also told the parliament that Air India lost about Rp72 billion in the year ended 31 March, said that the carrier was taking other steps to stem losses.

These include cutting flights on traditionally loss-making routes, returning leased capacity, reviewing manpower requirements and cutting the head count.

DMIA posts 21% increase in passenger volume amid global economic crisis

DMIA posts 21% increase in passenger volume amid global economic crisis Print
Regions
Written by Jacob Cunanan / Correspondent
Monday, 20 July 2009 21:58

CLARK FREE PORT, Pampanga—Amid a downturn in the aviation industry caused by the global economic crisis, the Diosdado Macapagal International Airport (DMIA) here continues to attract more passengers as it posted a 21-percent increase in international passenger volume in the first five months of 2009.

 This was revealed by Clark International Airport Corp. (CIAC) president and CEO Victor Jose Luciano during the 2009 DMIA product update at the Wow Philippines Central Luzon Tourism Fair at the Clamshell in Intramuros, Manila, recently. 

 A report from the CIAC corporate-planning department showed that 251,719 international passengers passed through the DMIA from January to May this year compared with 208,858 in the same period in 2008, or a difference of 42,861 passengers.

 The report also showed a significant increase of passenger volume in the month of January alone by as much as 27 percent with 53,068 compared with the 41,944 posted in January 2008, a trend that proves the DMIA is one of the busiest airports in the country. 

 “I am happy to report that despite a 16-percent slump in the first five months of 2009 in the entire aviation industry in the Asia-Pacific region caused by the global economic recession and the A[H1N1] virus, the DMIA posted a 21-percent growth over the first five months of 2009,” Luciano told some 200 participants of the DMIA product update. 

“CIAC is now at the forefront of aviation development in the Philippines. The DMIA is an airport that has, over the last four years, created a life of its own. From virtually nothing, the Clark airport will host around 700,000 international passengers, both incoming and outgoing, this year,” Luciano said.

He stressed that the DMIA is now known as “the low-cost airline airport of the Philippines” where low-cost airlines charge cheap fares and provide passenger convenience by making available online booking through the respective web sites of the airlines flying to Clark.

Airlines currently operating at the DMIA include Asiana Airlines of South Korea that flies to Incheon; Air Asia of Malaysia that flies to Kuala Lumpur and Kota Kinabalu; Tiger Airways that flies to Singapore; Cebu Pacific Air that flies to Bangkok, Macau, Hong Kong and Singapore as well as domestically to Cebu; and Southeast Asian Airlines and Zest Air that both fly to Caticlan en route to the island resort of Boracay.

“Very soon, flights to Taiwan and the Middle East by the big legacy airlines will also soon be made available as soon as the new terminal is finished,” the CIAC chief said.

 “We are now promoting Clark to be the international gateway of the Philippines. The terminal is undergoing bidding and we are talking about a speed rail so that in the future, it would be easier for people to go to Clark and take their flights. When we finish the terminal in about two years, we will expect more and more airlines, especially the big airlines, to fly to Clark,” Luciano stressed.

He explained that this development will be beneficial to overseas Filipino workers because they can now fly home more often, could even bring their families along to their country of employment, and they can visit other countries in Southeast Asia.

Luciano also cited that people in Manila, particularly in the northern parts which include Quezon City and the Camanava (Caloocan-Malabon-Navotas-Valenzuela) area, find it more convenient now to fly via the DMIA that could be reached through the North Luzon Expressway that is now connected to the Subic-Clark-Tarlac Expressway.

  “Clark is the airport of the people of Central Luzon and Northern Luzon. The DMIA is our airport and you will soon see more and more flights for your convenience in the future,” Luciano stressed.

Luciano said CIAC is currently conducting a road show to promote the DMIA and the flights and services it offers.

“The 2009 DMIA road show that has gone around Northern Luzon for the past three months and is expected to reach more areas in the coming months has been a big boost to the airport’s promotional thrust to promote the international flights at the DMIA,” he said, adding there are now moves to bring the road show to countries in the Southeast Asian region.

“We invite the leaders of the travel agencies, the hotel industry, the chambers of commerce, socio-civic organizations such as the Rotary Club and the Jaycees, everybody, to come fly in and out of Clark,” Luciano stressed.

Prior to the Intramuros stop, the ninth for the DMIA road show, it was held in Baguio City on June 30 and has visited the provinces of Bulacan, Zambales, Tarlac and Nueva Ecija in Central Luzon and the Northern Luzon provinces of Pangasinan, Ilocos Norte and Ilocos Sur.
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AirAsia courts budget travelers (China Daily)

AirAsia is taking advantage of its position as a low-cost airline to increase market share among budget-minded travelers in a down economy.

"A low-cost carrier like AirAsia is better suited to maneuver challenging economic times, since more people are switching to low-cost carriers as their first choice when traveling," Kathleen Tan, regional commercial director for the airline based in Kuala Lumpur, Malaysia, told China Business Weekly.

Tan said the H1N1 influenza outbreak has added to aviation's financial struggles since the second half of last year.

However, the downturn in tourism and the economy also offers an opportunity to revaluate policies and embrace change, she said.

The airline on June 24 became the first to remove administration fees from the cost of an airline ticket.

Now all airlines except AirAsia add an administration fee to the ticket price. Those administration fees can run as high as 20 percent of the ticket price.

AirAsia passengers just pay the cost of the ticket plus tax, which has been absorbed into the posted ticket price.

"The air ticket price will be an all-in-one price. It increases the transparency of the air fare system for AirAsia and helps passengers better understand the air ticket fare structure," Tan said.

"Abolishing the administration fee will reduce the fare and thus boost sales volumes for the company," she said.

AirAsia has already proven profitable in a tough economy.

The company's current EBITDAR (earnings before interest, taxes, depreciation, amortization and rent) is RM (Ringgit Malaysia) 46 million ($12.91 million) with 35 percent margins.

The airline recorded 21 percent growth to 3.1 million passengers year-on-year in the first quarter of this year.

The company reported year-on-year increases of 591 percent in core operating profits to RM 166 million for the first quarter, and a 33 percent increase in revenues to RM 714 million.

"It's also a year in which we are placing an even greater emphasis on innovation and quality," Tan said.

"With the abolition of the administration fee, we expect to see strong competition from other airlines, which to us is healthy in ensuring that we remain at the forefront," she said.

AirAsia last November became the first airline to abolish surcharges.

In addition to abolishing the administration fee in June, the company has added other incentives such as larger-sized baggage allowances, discounts on pre-booked on-flight meals and website and airport kiosk check-in procedures, she said.

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AirAsia also has implemented an "On Time Guarantee" policy that compensates passengers who experience flight delays of more than two hours.

AirAsia, which has carried 4 million passengers to China since its inception, has nine destinations in the country: Guangzhou, Shenzhen, Macao, Hong Kong, Guilin, Haikou, Hangzhou, Tianjin and Taipei.

"Our unique selling proposition is allowing us to continue to grow and expand in China," Tan said.

Tan said the airline is considering adding Chengdu as a destination and also will be adding more flights to existing cities in China.

AirAsia was founded in 1993 and began operations in November 1996 in Malaysia.

The airline was founded by the government-owned conglomerate DRB-Hicom, Malaysia's largest automotive company.

In December 2001, the heavily indebted airline was purchased by Malaysian entrepreneur Tony Fernandes, owner of Tune Air Sdn Bhd and a former executive for US-based Time Warner Music Group in Malaysia.

Fernandes was hailed in business circles for his fast turnaround of AirAsia, which posted its first profit in 2002.

The airline also quickly launched a series of new routes from its hub at Kuala Lumpur International Airport.

AirAsia began flights from Bangkok to Xiamen in 2005, becoming the first low-cost airline in Asia to gain entry to China.