AirAsia announced its 2QFY18 operating statistics, with the consolidated operations (Malaysia, Indonesia and Philippines) reported a slight increase in passengers’ volume by 2.1% QoQ to 10.8m. Despite that, load factor declined 1.8ppts QoQ to 85.5%. Its fleet size QoQ grew by one aircraft for Malaysian operation. Despite low season, higher traffic volume was reported by its Philippines operation (+13% QoQ) with load factor flat QoQ at 87%. Meanwhile, Thailand (TAA), India (AAI) and Japan (AAJ) operations reported load factors of 85%, 87% and 79% respectively. AirAsia is scheduled to release its results and passenger yield data in 4 weeks’ time. We maintain our forecast and Outperform call on AirAsia, with target price of RM5.03 pegged on 13x FY19F EPS.

• 2QFY18 statistics within expectations. AirAsia consolidated operations reported an increase in seat capacity by 4.2% QoQ to 12.7m, exceeding passengers’ carried by 2.1% QoQ to 10.8m in 2Q18. This bringing its load factor to decline to 85.5% (vs 89% in 2Q17). Nevertheless, it is within our expectations, accounting for 50% of our FY18 forecast. During the quarter, one aircraft was added to its fleet size for its Malaysian operation (Table 1). Malaysia commenced operation of one new route and increased frequencies on 10 routes (i.e. 8 from Kuala Lumpur, 1 from Langkawi and 1 from Johor Bahru). However, its passengers carried marginally declined by 0.2% QoQ. Meanwhile, Philippines reported higher passengers carried (+13% QoQ) with flat load factor QoQ at 87% as its commenced operations of 3 new routes (i.e. 2 from Cebu, 1 from Manila) and increased frequency of 1 route from Cebu. Despite low season for its Indonesia operation, it reported commendable load of 81% (vs 80% in 1Q18).

• Associates’ performance. Thailand reported lower load factor of 85% in 2Q18 (vs 91% in 1Q18), with passengers carried declined 5.8% QoQ (Table 2). Meanwhile, India added 2 aircraft to its fleet size, bringing its seats capacity and passengers carried increased by 18% and 24% QoQ respectively. As a result, its load factor jump by 4.2ppts to 87% (vs 83% 1Q18) (Table 3). For Japan, it reported flat QoQ passenger load at 79%. During the quarter, it increased flight frequencies from Nagoya, bringing its traffic volume and seat capacity to jump by 10% QoQ (Table 4).

Source: PublicInvest Research - 30 Jul 2018