Malaysia-listed AirAsia Group (KLSE: AIRASIA) is one of the fastest growing airlines in the region. With its emphasis on cost-efficiency, the airline has managed to double its revenue in the last five years, whilst maintaining a healthy net operating profit.
In this article, I will discuss some key performance metrics from AirAsia Group’s results for 2018 and how these can impact its earnings going forward.
Cost
Perhaps one of the most important aspects of a low-cost carrier is its cost-efficiency. As passengers of low-cost carriers are extremely price-sensitive, AirAsia’s ability to keep its costs down, and in turn keep ticket prices low, have been a large reason for its success.
One key metric to assess AirAsia’s cost-control is the “cost per available seat kilometre,” or CASK for short. CASK is a measure of how much it costs an airlines to cover the cost of one seat for each kilometre-traveled.
In 2018, AirAsia’s average CASK increased by 13% to 14.83 sen. A part of this increase was due to higher fuel costs. Excluding fuel costs, CASK increased by 7% to 8.92 sen.
Management attributed higher maintenance, overhaul, and other operating expenses as the main culprits for AirAsia’s higher CASK in 2018.
Capacity, passengers carried and load factor
Capacity growth has been the key growth driver for AirAsia in the past and it doesn’t seem to be slowing down. In 2018, the company increased its capacity by 18% to 52.5 million. Passengers carried in 2018 increased by 14%.
Although there was a slight mismatch in passenger growth and capacity which led to a decrease in load factor (how full its planes are), the growing market for passenger air travel in the region should boost AirAsia’s passengers-carried over the next few years.
Market share
AirAsia’s dominance in Malaysia has been growing each year. With the capacity increase in 2018, AirAsia increased its market share in Malaysia to 58% in the quarter ended 31 December 2018. The company also has a 20% market share in the Philippines, up 4 percentage points from the previous quarter.
The fact that the airline ended the year with a net operating profit of RM 906.9 million shows that Airasia is pursuing growth while ensuring profitability.
The Foolish bottom line
2018 was a busy year for AirAsia as it consolidated its freight belly space, Red Cargo, into its group of companies. It also sold its aircraft leasing operations to BBAM Limited and its 25% stake in its AAE Travel business to Expedia.
However, through it all, AirAsia had grown its core operations at a reasonable rate in 2018 that resulted in a 9% increase in revenue. Although higher fuel prices and a lower load factor drove costs up, the low-cost airline seems to be taking the right steps to solidify its market-leading position in Malaysia, while increasing its market share in other countries such as Philippines, Thailand, and India.
https://sg.news.yahoo.com/3-metrics-understand-airasia-group-032416572.html
