Author: YiStock   |   Latest post: Sat, 23 Feb 2019, 12:57 PM



Author:   |    Publish date:


This is my first article in 2019, a real tough company to study, too many data, too many factors. But a SUPER POTENTIAL one!

Tony has uploaded his message in twitter earlier,

And today he shoot another one!


I'm hopeful, though not 100%, based on my tracking. Simply because major operating factors that affecting AAX profitability seem to be in favourable condition now. Due to the complexity of the airline business, i will try to portion them into multiple parts inside this article and toward the end of this article, i will put out a matrix for 2019.


Let begin!


Airasia X is operating as a mid-haul low cost airline. Not long haul. The company was making years of profit before listed in Bursa Malaysia in 2013. Unfortunately, condition turn sour especially when Ringgit crash from 3.20 towards 4.00 again USD. You can see the share price performance in above chart, a real ugly one.


For AAX to be profitable, there are generally seven factors that AAX must overcome.  

(A) Revenue/ ASK > Cost/ ASK

(B) Forex gain/ loss

(C) Hedging 

(D) Finance income > finance cost 

(E) Associate Contribution (Thai AAX)

(F) Special item (gain/loss) 

(G) Deferred tax gain/loss 

Of the above seven,  (A) and (C) will affect the Operating Income of the airline. (B), (D), (E), (F) will affect Profit Before Tax, and (G) will ultimately affect comany profitability of that particular year/ quarter.

Let start with (B) Forex gain/ loss.


(B) Forex gain/ loss

If you are a regular reader of my article, you should know that this factor really depends on "Net Exposure" of the currencies involved in AAX business. An appreciation on Ringgit will not necessary result in forex gain/ loss. For AAX, it is kind of quite consistent whereby it has constantly showed negative exposure to major 3 currency that affecting its business: USD, AUD & JPY. You may refer to below currecy exposure table for AAX for 2014, 2015, 2016 & 2017.


Key Observation:

Over the past 4 years (excluding 2018), the next exposure to foreign currency has been getting narrow and narrow. USD net exposure has reduced from (RM 1.66 bil) in 2014 to (RM0.29 bil) in 2017. One of the main reason for such tremendous improvement was due to speedy reduction of USD borrowing, from RM 1.5 bil in 2014 to RM 861 mil in 2017.  [Based on latest quarter result, the net exposure should has reduced further in 2018 where AAX continue to pare down thier borrowing]

See the impact of forex gain/ loss for the past 4 years as below:

The very big impact of forex net exposure resulted in high magnitude of forex loss in early years and triggered major share price collapse from IPO to 2016).

Please see below the magnitude of the loss/ gain in hundreds of million of ringgit quarter in quarter out. 

And the impact is getting smaller and smaller in recent years which also means that AAX has successfully solved the problem of Forex Net Exposure issue. See below.


(C) Hedging 

Hedging is another key factor that affecting AAX fuel/ASK and therefore Cost/ASK which include fuel/ASK. AAX has constantly hedge jet fuel via singapore Jet fuel kerosene which correlate with Brent oil very closely. (p>0.9)

A quick look below the brent oil chart monthly chart from 2011 to 2019. 



Prior to 2015 when brent traded above USD 100 per barrel, AAX was collecting fuel surcharge. Such surcharge has then ceased to be collected when oil crash in 2015. Typically airlines will not hedge oil when oil price is high but they will opt for fuel surcharge. See below AAX hedging history.

Key Observation:

AAX has constantly hedge oil from 2015 to 2017 quarter 2. Thereafter, the hedging ratio went down. Usually an airline will not hedge the oil when they think oil has peaked, or they have confident to pass through the addtional cost to customers via fuel surchage/ increase airfare. For AAX, i think they probably thought the oil has peaked in mid 2017 and they stop hedging.

Unfortunately, the oil keep going up and touch USD 80 per barrel in December 2018 before soften again to USD 50 per barrel in 1st quarter of 2019. Somebody will take responsible for this and i think this guy has left the company.

Below you can see the positive impact of hedging to AAX.

For example in year 2016. AAX has hedged  nearly all the oil it needed in 2016.

You then counter check the total fuel expenses change from 2015 to 2016.

The NET GAIN of hedging come in at around RM 91 milion.

And the fuel expenses up by RM 95 mil in 2016 compare to 2015. 

It offset each other. 



*Please take note that AAX has not separate the gain and loss of their hedgings contracts, but generally we can see that 2018 was the miserable year.

From above 2 tables, you see how important hedging is to airline industry.

The recent brent oil correction has provided AAX with not just cheaper fuel in 2019 and also an opportunity to start big hedging for 2019. With the hedging in place, 2018 disaster should not be again repeat.

You can see the carrying amount of fuel hedging contract has increased to 4.9 million barrel in Q4 2018 quarter report. 

One may ask what happened if instead of going up, the oil goes down?

If you notice in 2016, oil hedging contract can range from 4mil to 6 million barrels. I think they hedge both way. 

In summary, hedging took away one important variable from AAX. Then AAX performance will be 100% oil-detach.


(A) Revenue/ ASK > Cost/ ASK

Below are the tables of Revenue vs Cost of AAX

Key Observation:

(1) The 1st reason for AAX investors to buy AAX is of course, the profitability of the company. It is not wrong. And AAX team is certainly working very hard to push for Revenue/ ASK, load factors, passenger carried, and at the same time, keep cutting Cost/ ASK. However, if you are common investors, i afraid you may be missing the big story of Airasia/AAX model - the potential of cash to be salvaged and pay out as special dividend via selling off the asset when matured. The real cash that the shareholders are receiving!!!

(2) As i said above, It is silly for AAX investors to focus on just profit and loss of the company. And neglecting another true big piece of MEAT. [The leasing arm of AAX]

AAX is duplicating the success of Airasia by adding more and more aeroplane [ via opening of more profitable routes, push load factors, increase passengers carried year over year (from 3.6 mil in 2015 to 6.2 mil in 2018). It is adding another 5 more aeroplane in 2019 and to push the ASK and trying to gain market share by offering passenger lower fare which will push up the load factor eventually when route got mature. The core market now is Australia, Korea, Japan, China & Taiwan which are popular tourist destination.] AAX want passengers, lot and lot of them. The gold mine in future.

Lease Income should grow further as AAX will start taking delivery of new Airbus 330 neo. AAX has order 100 units of these carriers AT BIG DISCOUNT and will take delivery gradually over the coming years. These are fuel efficient planes that save fuel by 25%. The receiving of new A330 neo should increase the lease incomes, and total Revenue/ASK.

Airasia sold 78 planes for RM 4.2 billion after years of effort.

I personally see AAX is duplicating what Airasia is doing and eventually the fruit to be reaped will be substatial.

The model: Buy good aeroplane at great discount to grow the passenger carried--> once it grow to certain size, you can sell the aeroplane to lessor at good price and cash out. That's how airasia special dividend derived  from.  

THAT's the TRUE BIG FAT MEAT. You do see how this big fat meat push Airasia share price, don't you?

THINK OF THIS, Many investor buy the same dream during the IPO at RM1.20. Now I'm buying the same dream at RM 0.30 or lower. 4 times cheaper!!! If share price drop below RM 0.20, i bought the same dream at 6 times cheaper!!! 

(3) The ancillary incomes will continue growing not matter how because AAX is adding more planes, more flights and flying longer routes. Thier sweet spot now is 6 to 8 hours flight which will push up the ancillary incomes.  

(4) All in all, while AAX is working hard on Operating Profit, they are also rushing for this big piece of meat. AAX is dedicated to provide low fare, to push for it operating statistic and eventually push up leasing arm and reap the fruit. Passengers win, Investors win.

I hope common investors to regain thier focus when investing in AAX. AAX is buying your time for growth, and with god wish, pay you back your time when right time finally arrive. It should not be too long because AAX is not starting from zero, it starded with the help of Airasia's passenger data gold mine.

(5)On Cost/ ASK ex fuel, AAX has did wonderful job over the years in reducing the Cost/ASK (ex. fuel) as shown in below:

(6) Do pay attention on COST/ASK ex fuel, it keeps dropping.

(7) Those numbers in green means the Revenue/ ASK is greater than Cost/ASK, which gives Operating Profit.

(8) Those numbers in red means the Revenue/ ASK is smaller than Cost/ASK, which gives Operating Loss.

(9) Blue means break even.

Since hedging gain/loss is not part of the Revenue/ ASK or Cost/ ASK, hence those quarters in green are probably due to greater revenue (either higher average fare, ancillary income, and etc) and/or lower Cost in particular fuel price. Out of above 4 years data, 2016 was the best year (high Revenue/ ASK and low Cost/ASK).

Therefore, hedging is very important so that the impact of fuel can be offset by the fuel hedging gain (non-flight) as per pointed out in (C)


(D) Finance income > finance cost 

Key Observation: As the debt goes down, the net finance cost has reduced significantly.


(E) Associate Contribution (Thai AAX)

Key Observation: The impact is not significant yet. But Thai AAX is very potential too.


(F) Special item (gain/loss) & (7) Deferred tax gain/loss 

Key Observation: SPEECHLESS!!! I need expert to explain to me this part. Soo Jin Hou, Icon8888, Probability, or anyone?



Ever since AAX listed in bursa, the fundamental has improved substantially. 2019 is probably the best year for AAX. Below i done up a matrix to summarise the challenges face by AAX in the past 4 years.

Year  Forex Hedging Cost/ASK ex fuel Finance Cost Revenue/ASK
2015 X O X X X
2016 X O X X O
2017 X XO X X X
2018 X X X X X
2019 O O O O ???

For 2019,

(1) forex gain should be no longer important when net exposure become irrelevant

(2) hedging has been put in place again

(3) Cost/ASK ex fuel should improve further as per previous 4 years trend.

(4) Net finance cost will be lower when borrowing continue to reduce.

(5) Revenue/ASK - This segment must be work in optimum level to give positive operating profitability while ensure the leasing arm can continue to growth (Revenue/ASK depends on fare, route, ancillary income and etc which i not able to estimate)

(6) I see AAX's profitability in 2019? -a good to better- rating due to favourable condition on factors such as forex, oil hedge, cost/ask ex fuel and finance cost.  

Special NOTE:

Above Asset held for sale amounting to RM 999 mil 1st appeared in the balance sheet of AAX. This should be due to AAX is disposing own aircraft (older model) to lessor and lease them back while taking delivery of A330 Neo.

Should this happen, AAX may use the proceeds to repay partial or all the debt in note 23. Assuming full repayment, AAX will become net cash company, this will save the company finance expenses in ITEM (D)


























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Labels: AAX

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Chart Stock Name Last Change Volume 
AAX 0.16 0.00 (0.00%)

  3 people like this.
Choivo Capital That plane is sold in the same batch as the Airasia sale .
23/02/2019 2:48 PM
John Lu Tony.. Haha.. Talk and keep talking but years of losing money
23/02/2019 3:23 PM
lizi oil going up....takut..even got hedging....still takut...
23/02/2019 4:24 PM
Travestor Yep and these announcements of incorporating 10 leasing companies are probably to achieve the same thing as AA...


#2 & #3

#4 - #9

23/02/2019 5:17 PM
YiStock Below articles clearly set up the AAX fleet size and going forward.


one significant impact given by the new A330-900 neo is that it can reach much longer distance.

A much longer distance may translate into much higher airfare. Longer distance also encourage higher ancillary income on board (from meal to entertaiment).

The prospect of AAX is simply there. Just waiting for good timing to jump in.
23/02/2019 6:39 PM
Travestor What price you deem is good? ;)
23/02/2019 8:58 PM
YiStock i will wait for dust settle down after market priced in Q4 2018 result. Wait for low volatility.
23/02/2019 9:26 PM
supersaiyan3 I am not interested in AAX, but can talk little bit.

1) Airasia's main competitors are MAS, Malindo, sort of weak. Airasia X's competitors are QANTAS, SIA, CATHAY, etc much stronger.

2) Airasia's plane sale is done deal. PE 3.54. Airasia X negative PE most of the time.

3) Last year Airasia gave a few routes to AAX for free, now seems not much difference also.

4) When your unit cost is so low, in fact making profit and branding shouldn't be that difficult. There are problems that AAX management and TF doesn't understand yet. Nobody in this world know yet.

5) Yes, AAX may sell planes, but it will take a long time. Don't think there will be special dividend like Airasia. AAX is broke.

6) Two/Three years ago, KM said can take over AAX. Then Tony said no. You are on your own! Very difficult to cure AAX, not even Airasia.

7) In the first place, AAX was set up like a colony(殖民地), that's why Airasia held low shareholding.

8) However, the maintenance expenses seems to be really going down. You remember a group of engineers protest? I wish this is a good news: AAX and Airasia make use of Big Data to monitor maintenance. But I will not fly AAX for the moment. About 1 year before MH370, Johari said daily maintenance expenses down to 1m from 5m. Then they lost MH370. 8501 was also partly due to maintenance problem.

9) Thailand AAX listing is a good news though.

10) New CEO seems to be smart guy.

11) This is the best year for AAX, but still only mediocre performance comparatively.

Good luck, guys!
24/02/2019 2:03 AM
YiStock 1) SIA, Qantas, cathay are target, not competitors.
2) airasia PE 3.54, plane sales done deal are known facts. Do you expect how fast it share price can jump 100% from now?
3) the route transfer talk started in february and approval took about 6 to 8 months. looks like aax is benefited because it registered operating profit in Q4 18 and total q4 core earning stook above + rm 40 mil even under 89 high fuel price low hedge and lower airfare in Q4.
4) if you can't see through a problem, leave it to god or continue work hard to see through it.
5) dont expect dividend, dont know why you expect a dividend in the 1st place. aax is potentially future airasia. not current airasia. plane sold help to cut all debts and it save interest. A330-900 neo is coming. AAX is ready to fly long haul on top of mid haul.
6) very difficult to cure is because of one's imagination. Not the fighter mentality la.
7) 49% is low shareholding (tuneprotect,airasia,tony,km). Free float share of aax is about 51% Not sure how much shareholding is consider high to you.
8) airasia n aax share same maintainance team la...u dare to fly airasia?
11) compare to airasia, you are right.
24/02/2019 8:27 AM
YiStock AAX is at the bottom now. Another bad year will not harm the share price i think. Airasia is at top now, 1 bad quarter can cause serious damage to investors.

Risk / Reward ratio is my priority too when investing a share.
24/02/2019 8:42 AM
supersaiyan3 (1) The 1st reason for AAX investors to buy AAX is of course, the profitability of the company. It is not wrong. And AAX team is certainly working very hard to push for Revenue/ ASK, load factors, passenger carried, and at the same time, keep cutting Cost/ ASK. However, if you are common investors, i afraid you may be missing the big story of Airasia/AAX model - the potential of cash to be salvaged and pay out as special dividend via selling off the asset when matured. The real cash that the shareholders are receiving!!!

And your title said "BIG FAT MEAT? "

In response to Your no.5

You are in denial/defence mode, no point to discuss then.
24/02/2019 10:23 AM
supersaiyan3 8) If Airasia maintenance people jump up and protest, I will not fly Airasia too. But they haven't yet.
24/02/2019 10:26 AM
YiStock they have not sell any plane yet, not even the current 5 planes. Specify your time frame. Then u get specific answer.
24/02/2019 11:54 AM
YiStock I dont expect any specific devidend if current 5 planes sold. Do u expect that?
24/02/2019 11:55 AM
YiStock "aax is not current airasia", u read?
24/02/2019 11:59 AM
Shinnzaii supersaiyan3...unlikely going to happen....operate airline one know employees include flight attendants are very important for them other than fuel expenses itself...if you treat your staff well then should be fine...try to look at glassdoor to find out the review from employees...unfortunately larh, fuel expenses is the main expenses in AAX...but at least they not sit quietly and improved their CASK excluding fuel...
24/02/2019 12:01 PM
YiStock And i am very concerned that u relate mh 370 airplanes lost to the maintainance team. You know what is 祸从口出?

good luck to you!!!
24/02/2019 12:03 PM
Shinnzaii Referee...you can upgrade larh...business premium suit package...hahahaha
24/02/2019 12:06 PM
kuan1209 Stop being naive. Most passengers see AAX as Airasia. If AAX got accident, they will only blame Airasia as a whole. Do you think Airasia will risk their reputation?

Safety Rating 7/7
24/02/2019 12:11 PM
supersaiyan3 I have been saying this for the last three years. No need luck! I provide a lot of the information to a few international website. I also wrote to the new Transport Minister, but of course no body give a shit.
24/02/2019 5:40 PM
supersaiyan3 禍從口出?恐嚇我呢!

當我說LayHong的雞被滅了填埋的時候,有一個叫Herbert Chua的說報警捉我呢!看來我高估你了,你們就一個水平上。


24/02/2019 5:50 PM
YiStock AAX is broke 10 years down the road? No capability to give special dividend after the leasing arm and business establish. Are you sure?

Anyway, i know you are one of the can't-deal-with forummer in Airasia chat room. I rest my case.
24/02/2019 6:01 PM
Ximon Lim For def tax part, my observation, Aax last purchase of asset(huge amount, 400mil in 2014 and 1bil in 2013). From tax point of view, Capital allowance is 40% in the first year, 20% for the subsequent.

Until 2016, The nbv of assets is higher than the tax written down value + unclaimed capital allowance. Hence, every year there is a deferred tax liabilities incurred in profit and loss.

For Q3, why there is a deferred tax asset in P&L. This frustrate me quite a time. I can’t find out the reason. The only possible reason is the addition of 162mil purchase in fixed asset. But in Q4, the addition of fixed asset of 9mil. Addition in fixed assets will pushed up the DTA for that quarter. For me, it is quite missleading.
24/02/2019 10:04 PM
YiStock Ximon, may i ask the sudden huge surge on deferred tax liability is related to their intention to sell the 5 planes? Since the planes are to be sold, therefore they expense it off? Many thanks
24/02/2019 10:29 PM
Ximon Lim According to accounting std, only expense it offf when the sales is completed. U Mayb refer to Airasia Q3 report note 28.
24/02/2019 11:43 PM
Ximon Lim AA have a huge unclaimed capital allowance, and they sold their old plane. Depreciation is 15-25 years for each plane, Capital allowance is 40% first year, subsequently 20% for the next 4 years.

For AA, although I can’t get their tax computation. But I can assumed, the unclaimed CA is so huge. When they sold their planes, for example, they will take out 100mil asset in nbv, but Tax written down value of Rm1. But leave unclaimed CA unchanged. Above is applied for asset purchased more than 2 years. That why in Q3, their DTA increased and reflect a Rm500 mil in their P&L.

In Aax, Q3 report, like I mentioned, DTA increased by Rm50mil? Due to addition of Rm268mil asset purchased? Then in Q4, reversal of Rm117mil, I guess is adjustment on over provision in prior quarter/ or accounting “magic” to make a better profit. Anyone raise in the agm, why asset purchased in Q3 is higher than Q4? Cheating??

Back to AA, I won’t worry about the profit making this quarter. Just scare tony make a magic again in def tax. Reversal? Same as Aax? Def tax won’t affect the operating profit but Malaysian don understand def tax, they see it as company performance. Haiz
24/02/2019 11:54 PM
YiStock if operating income is ugly for 1 particular quarter, can DTA to magic a little. That's the purpose of magic. For AAX, Q3 was already a very ugly quarter due to impairment, the DTA no helping at all. But Q4 is operating Profitable quarter, the DT pull it into red. Tony do not like green quarter?
25/02/2019 7:19 AM
Ximon Lim Q4 he wan magic pun can’t. Later it will big dif with annual report. He will GG.
25/02/2019 7:41 AM



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