The AirAsia Group reported its 1QFY13 operating stats. Amongst its 3 major hubs; growth wise, as measured by RPK (revenue passenger KM), Indonesia outshines (+35.1% y-o-y), followed by Thailand (+20.3% y-o-y) and Malaysia (+7.2% y-o-y). All in, the numbers were well within our forecasts. We remain buyers of the AirAsia Group.  Of the two, we prefer AirAsia (BUY, FV: MYR3.39) as a laggard play.

¨      Indonesia outshines followed by Thailand. AirAsia Group reported its 1QFY13 operating stats. Amongst its 3 major hubs; growth wise, as measured by RPK (revenue passenger KM), Indonesia outshines (+35.1% y-o-y), followed by Thailand (+20.3% y-o-y) and Malaysia (+7.2% y-o-y). The strong showing by IAA (Indonesia AirAsia) was due to its aggressive fleet expansion, which saw 5 new aircraft y-o-y coupled with the introduction of 5 new routes. However, due to the less popular routes being introduced, loads weakened by 2.4ppts (to 74.5%). TAA (Thai AirAsia) however, continues to see consecutive load improvements over the past 4 quarters, with its y-o-y loads coming in flattish.  MAA (Malaysia AirAsia) which is considered to be operating in a mature market saw loads weakening by 1.5ppts y-o-y suggesting that prospective passengers may adopt a wait and see approach ahead of the commencement of Malindo’s flight operations which took off sometime in mid-March and also the Lahad Datu warzone incident in March.

¨      Within estimates. All in, we deem RPK to be largely in line with our forecast. 1QFY13 traffic for both MAA and TAA accounts for 24% and 23% of our full year forecast respectively. As a comparison, back in 1QFY12, both MAA’s and TAA’s RPK during the period accounted for 25% and 25% of their full year RPK respectively.

¨      Unveiling Philippines and Japan numbers. AirAsia Group has now started to disclose the operating stats for its Philippines and Japan operations. Coming from a low base, a y-o-y comparison would not be meaningful but judging from the decent load factor of 76.3% and 70.4% achieved in 1QFY13 for PAA (Philippines AirAsia) and JAA (Japan AirAsia) respectively, we see that both these new carriers in the AirAsia Group are operationally at least likely to be profitable. With PAA already in collaboration with Zest, we see prospects to be favorable ahead as this will give AirAsia accessibility in operating from operating the Manila Ninoy Aquino International Airport, which is closer to the city compared to its existing base at Clark Airport. Japan too is up for improved traffic and loads as it had recently commenced operations at its second hub in Nagoya.

¨      Stay invested in AirAsia Group. We remain buyers of the AirAsia Group.  Of the two, we prefer exposure to AirAsia (BUY, FV: MYR3.39) which we deem as a laggard play. Asia Aviation (BUY, FV THB9.05) on the hand – although still a BUY – is likely to see investors waiting on the sidelines ahead of the earnings announcement given the strong share price rally.

Source: RHB