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AirAsia Q3 operating profit dips on higher costs

AirAsia reported a 7% fall in operating profit to MYR494 million ($121 million) for the quarter ended 30 September

On a proforma basis, accounting for the consolidation of Indonesia AirAsia and AirAsia Philippines, revenue rose 15% to MYR2.45 billion. Without the consolidation, the figure was up 45%.

The fall in operating profit was driven by a 12% increase in operating expenses to MYR1.8 billion, driven primarily by strong increases in staff, maintenance and depreciation costs.

Despite that, net profit rose 30%, as a lower share of profits from associates was offset by higher gains on foreign exchange and hedges, and lower deferred tax expenses.

Cash and cash equivalents at the end of the quarter amounted to MYR2.2 billion, up from MYR1.74 billion at the start of the financial year.

Load factor across the group declined by one percentage point to 87%, as an 11% rise in RPKs was eroded by a 14% increase in ASKs. CASK rose 5% to 12.8 Malaysian sen, while RASK was down 1% to 14.8 sen.

"Overall, the strong demand for air travel has delivered a set of very positive results for the third quarter despite it being a seasonally weaker quarter of the year, despite the rising fuel prices and currency fluctuations,” says AirAsia group chief executive Tony Fernandes.

Looking ahead, the carrier says it will take 12 aircraft on operating leases during the final quarter of 2017 to accelerate its growth in response to “the favourable competitive and operating environment of aviation in Asia.”

At the end of the year, AirAsia expects net additions of 22 aircraft to its group fleet, with a further 33 Airbus A320s set to join in 2018.

While not providing specific profit guidance, the airline says that it expects its full-year results for 2017 to beat its 2016 results.

AirAsia noted that there have been no material developments to its proposed joint venture in Vietnam. On its planned joint venture in China, the carrier signed a term sheet with co-investors China Everbright, Plato Capital and Oxley Capital on 25 September that sets forward 12 months to negotiate a comprehensive agreement to establish an airline based there.

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