AirAsia Group’s (AAGB) 4QFY21 operating statistics showed strong recoveries with passenger volume for the consolidated aircraft operating certificate (AOC) operations (Malaysia, Indonesia and Philippines) increasing by 103% YoY to 2.7m. This surpassed its capacity increase of 70%, leading to a 13ppts improvement in load factor to 80%. Improvements are due to strong demand from easing of travel restrictions in 4QFY21 and the introduction of quarantine free travel bubble for Malaysia. While demand is expected to continue to improve, we are however wary over the Group’s PN17 status and challenges it may face in pulling itself out of the situation, as we highlighted in our recent report dated 17 Jan 2022. While we see value in its non-airline business and there appears to be attractive upside to our unchanged RM0.79 target price, we suggest investors wait for more clarity on the Group’s turnaround plans. We maintain our Neutral call.

• AirAsia’s consolidated operations reported a substantial increase in passengers carried in 4QFY21 to 2.72m (YoY: +103%, QoQ: +674%), in-line with its increase in available seat per km (ASK) to 2,786m (YoY: +72%, QoQ: +506%). This was attributable to strong demand from the introduction of quarantine-free travel bubbles for Malaysia and easing of travel restriction in 4QFY21. Demand is expected to continue to improve following announcement that the Malaysian government has resumed the Vaccinated Travel Lane (VTL) between Malaysia and Singapore, effective 24 Jan 2022. The Philippines (PAA) unit continued to outperform with passenger traffic and seat capacity increasing 201% and 125% YoY respectively. The Indonesian (IAA) unit posted commendable load factor of 81% for 4QFY21 with passengers carried in December 2021 rising nearly seven-fold compared to Nov 2021.

• Associates’ performance. Thailand AirAsia (TAA) operated more domestic capacity in 4QFY21, with passenger carried and seat capacity increasing by 1340% and 1032% QoQ respectively. 4QFY21 load factor increased to 76% from 60% in the previous quarterly. Improvement in operations is due to easing of travel restrictions, with resumption of flights starting from 3rd Sept 2021. Demand is expected to continue to improve following recent announcement by the Thai government of the resumption of its quarantine-free travel scheme from 1st Feb 2022.

Source: PublicInvest Research - 28 Jan 2022