What AirAsia Said About Its Earnings Performance

Of course I was rather anxious to read what AirAsia had to say to the local press in regards to its earnings performance announced last night.

I, for one, was Massively Disappointed With AirAsia's Earnings.

Excluding the forex gains, AirAsia's core profit was only a mere 33.834 million. Which is never going to be enough when one put into consideration that AirAsia has a total mind boggling debt of 7.215 BILLION!

Let's do the math. At 33.834 million per quarter, one year's total operating profit would only be less than 150 million.

Is that enough?

Let's be kind. Let's top it up to 200 million per year.

Hey... I will also ass-u-me that one day, don't know when, AirAsia will have to repay back these loans, yes?

So at 200 million per year, how many years would it take to repay that 7.215 Billion back?

Try 36 years!

And our poor government had granted (AirAsia) to date a whopping 930.591 million in deferred taxes!

Not in my flawed opinion it isn't! ( See past posting also: Just How Good Is AirAsia Earnings Performance Since Listing? )

Anyway on Business Times this morning.

• AirAsia swings to Q3 profit
  
  By Jeeva Arulampalam Published: 2009/11/21
  
  Low-Cost carrier AirAsia Bhd (5099) swung to a third quarter net profit of RM130.1 million on better passenger numbers and ancillary income.
  
  In comparison, it posted a net loss of RM465.5 million a year ago due to one-off provisions for contracts tied to fuel hedging and trades held by now-bankrupt investment bank Lehman Brothers.
  
  "Despite the third quarter traditionally being our weakest quarter, we did well and our Indonesian operation has turned profitable," said AirAsia group chief executive officer Datuk Seri Tony Fernandes.
  
  Speaking to analysts during a conference call yesterday, Fernandes said the airline was looking at a strong fourth quarter as underlying passenger demand remained positive.
  
  "We are well-placed and have seen good sales, especially with the latest one million free seats campaign. We are almost up 40 per cent each day since the campaign," he added.
  
  However, ticket prices for the fourth quarter are expected to be lower than the same period last year due to the challenging global economy.
  
  For the three months to September 30 2009, the airline's revenue grew 4 per cent to RM740 million driven by higher ancillary and other operating incomes.
  
  Fernandes said the airline's ancillary income would grow further in the next six to 12 months, having jumped some 57 per cent to RM36.2 per passenger for the third quarter.
  
  While passenger volume increased 19 per cent to 3.59 million passengers, AirAsia's load factor remained the same at 75 per cent from a year ago.
  
  The average fare was lower by 27 per cent at RM142 compared with RM195 in the third quarter 2008.
  
  If fuel prices continue to rise, AirAsia expects to be impacted negatively in the fourth quarter.
  
  It has taken partial fuel hedges to mitigate the volatility, with 20 per cent of the group's fuel (jet kerosene) requirement in the fourth quarter hedged at a fixed swap rate of US$75 (RM255) per barrel.
  
  Fernandes added that the group may reimpose a fuel surcharge if prices escalate above US$100 (RM340) per barrel.
  
  Meanwhile, AirAsia Indonesia posted a profit after tax of RM21.2 million compared with a loss of RM4.3 million from a year ago. The unit performed well due to its international routes to Australia and Singapore and utilisation of new fuel-efficient aircraft.
  
  However, AirAsia Thailand saw its losses widening to RM40.4 million from RM24.6 million a year ago, due to weaker consumer sentiment and lower fares.
  
  "We are confident of the Thai operations' ability to produce profits and its fourth quarter looks good," said Fernandes.

Hmmm... no mention of AirAsia forex gains of 102 million.

You would imagine that if one has an operating gain of 136.260 million and forex gains accounts for 102 million of the gains, or 74% of AirAsia's operation gains came from forex gains, you would assume that such an information is significant enough!

Apparently it isn't!

Here's the Edge Financial Daily version, AirAsia records net profit of RM130m in 3Q, which at least acknowledged the existance of the forex gains.

• KUALA LUMPUR: AIRASIA BHD posted net profit of RM130.07 million in the third quarter ended Sept 30, 2009 (3Q09) a turnaround from the net loss of RM465.53 million a year ago (3Q08) as revenue improved and it also benefited from a foreign exchange (forex) translation gain.

Just a plain mention that AirAsia benefited from a forex gain. Did not bother to mention how much!

74% of its gains was boosted by forex gain.

Surely that's a rather significant issue?

In regards to AirAsia Indonesia and AirAsia Thailand. I would assume that these two represented AirAsia so-called 'jointly controlled entity and associates'.

So why is AirAsia Indonesia and AirAsia Thailand owing AirAsia some 911.061 million in small change???

Why?

I was also thinking about AirAsia's balance sheet issue this morning and as many are aware I had posted many articles on AirAsia (clickable link to past postings) before.

Back in Aug 2009, I wrote It's A 20% Placement For AirAsia!

• AirAsia sees more than RM1b in coffers
  By Jeeva Arulampalam Published: 2009/08/04
  
  Low-cost carrier AirAsia Bhd (5099) expects to have more than RM1 billion in its coffers by the end of the year, as it grows its profits and undertakes a private placement, says its chief.
  
  “The cash will be used to lower the group’s gearing,” group chief executive officer Datuk Seri Tony Fernandes told reporters after the airline’s annual and extraordinary general meetings in Sepang yesterday

Compare that statement to what I wrote last night Massively Disappointed With AirAsia's Earnings

• Cash balances then was 231 million ( See here ) and total borrowings as at Aug 2009 were some 6.957 billion ( see here )

So after the stock sale (which raised some 508 million) and after the 'good earnings report', AirAsia's cash balances reported yesterday was 527 million. Total debts increased to 7.215 billion.

Makes you wonder doesn't it?