By Chan Quan Min
Long-haul budget airline AirAsia X has reported a fourth consecutive loss-making quarter as it struggles to fill excess capacity from its ambitious growth plans.
The airline made an operating loss of RM140 million in the third quarter this year compared to a small operating profit of RM25 million in the same quarter last year.
Third quarter revenue was reported at RM699 million, an increase of 16% year-on-year. However, this increase fell behind of a 24% year-on-year increase in flight capacity.
Notes to the financial results said AirAsia X had to “stimulate demand to achieve a load factor of 80.6% in the three months ended September 2014” following “significant capacity increase”.
In short, AirAsia X gave big discounts to passengers in order to fill its planes. The average passenger fare in the third quarter this year was RM420 compared to a far higher RM501 in the same quarter last year.
The airline is suffering from excess capacity from overzealous expansion and competition from other carriers.
“These losses are attributable to … capacity increases of over 40%, which resulted in lower yields from a higher proportion of promotional fares used to stimulate new demand creation,” said written notes to the airline’s accounts.
“Although the capacity expansion created short-term earnings pressure, the company believes that the investment will bear fruit in the long term.
“The company believes that it now has the highest market share of passengers carried from Malaysia to its core markets in Australia, China, Korea, Japan and Taiwan. It has also seen a significant increase in the number of connecting passengers between North Asia and Australia.”
According to Reuters data, shares of AirAsia traded on Bursa Malaysia have lost almost 30% of their value his year to date compared to a far smaller 2.6% decline in the benchmark stock index.
Parent airline AirAsia will report its third quarter results later today.
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