Capital A Berhad · MYX:CAPITALA
Capital A Berhad — AirAsia — Q2 2007 Earnings Presentation
51 slides from Capital A Berhad's earnings presentation, Feb 28, 2007
Slide 1: Second Quarter 2007 Results
Second Quarter 2007 Results 28 February 2007
Slide 2: Disclaimer
Disclaimer Information contained in our presentation is intended solely for your personal reference and is strictly confidential. Such information is subject to change without notice, its accuracy is not guaranteed and it may not contain all material information concerning the company. Neither we no
Slide 3: Delivering Growth, Delivering Record Profits
Delivering Growth, Delivering Record Profits Rev enue (RM million) 401 Profit Margins 62% 44.4% EBITDAR 247 33.2% Q2-06 Q2-07 Pret ax Profit 27.4% EBIT (RM million) 93 80% 23.3% 20.9% Pretax Profit 52 18.6% Q2-06 Q2-07 Q2-06 Q2-07
Slide 4: Key Highlights of Second Quarter
Key Highlights of Second Quarter First true quarter of fair market competition with no subsidies Profit before tax of RM93.3 million – record pretax profit margin of 23.3% – lowest cost airline in the world 2.66 US¢ / ASK – despite investment in KK & Kuching hub (enduring start-up losses) Robust dis
Slide 5: Growth, Growth, Growth
Growth, Growth, Growth Passengers Flown by AirAsia Group (‘000) 9,312 YoY wth g r o % 70 6,785 6,289 Q2 3,991 3617 2,839 Q2 1,481 2180 Q1 611 3169 291 Q1 1810 M ar-2001 Jun-2002 Jun-2003 Jun-2004 Jun-05 Jun-06 1H-2006 1H-2007 There is no stopping the LCC phenomenon
Slide 6: Capturing Market Share & Growing the Market
Capturing Market Share & Growing the Market Domestic Market Share Passenger Projection to FY2013 51% 60 15% 46% 50 25% R C AG 25% 54 40 30 % 27% 47 15% 25% 30 25% 39 20% 40% 20 31 12% 60% 27 10 21 15 9 0 2002 2003 2004 2005 2006 NOW FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 (Actual) Li
Slide 7: Painting the Sky Red
Painting the Sky Red Period Destinations Served Jan 2002 6 Jun 2003 11 Jun 2004 26 Jun 2005 52 Jun 2006 65 NOW 75 Latest Routes KK – Penang Kuching – Penang Upcoming Routes KL – Jogjakarta
Slide 8: Results Commentary
Results Commentary airasia.com
Slide 9: Growth through Aggressive Pricing
Growth through Aggressive Pricing Average Fare (RM) Load Factor (%) 2006 82% 2007 173 83% 164 79% 152 80% 136 76% 2006 70% 2007 Quarter 1 Quarter 2 Q1 Q2 Q3 Q4 Low fares AirAsia’s + High load factor = Strong Profitable Strategy Growth + Low cost
Slide 10: Profitability – 2Q-07 vs 2Q-06
Profitability – 2Q-07 vs 2Q-06 Rev / ASK (US ¢) 11% 3.62 Pretax Income (RM million) 3.27 93.3 80% Q2-06 Q2-07 Cost / ASK (US ¢) 51.9 2.69 (1%) 2.66 Q2-06 Q2-07 Q2-06 Q2-07
Slide 11: Cost / ASK – what changed from last year to this year?
Cost / ASK – what changed from last year to this year? Cost Breakdown Q2 2007 Q2 2006 ∆ (%) Reason (US cents / ASK) Staff Costs 0.36 0.35 3% Opening of new bases Fuel and Oil 1.31 1.31 0% Fuel efficient fleet User & Station Charges 0.27 0.16 70% More international route Maintenance and Overhaul 0.21
Slide 12: Outlook on Cost Reduction
Outlook on Cost Reduction Airbus A320 aircraft – cost economics far superior compared to Boeing 737-300 Strengthening of Ringgit against US$ Dollar – hedged 15 aircraft at par forward rate – potential savings of RM200 million for entire financing term of the aircraft Airport charges – negotiating wi
Slide 13: The Most Fuel Efficient Fleet
The Most Fuel Efficient Fleet Fuel Consumption per 100 ASK 4.0 AirTran 3.8 Liters per 100 ASK 3.6 GOL SouthWest 3.4 Ryanair EasyJet WestJet 3.2 JetBlue 3.0 500 1000 1500 2000 St a ge l en gt h (k m ) Source: Company Reports
Slide 14: Our Advantage = Lowest Cost in the World
Our Advantage = Lowest Cost in the World Lowest cost airline in the world by a significant margin 8.0 GOL EasyJet 7.0 WestJet 6.0 AirTran VirginBlue SouthWest COST / ASK 5.0 JetBlue Ryanair 4.0 3.0 2.0 1.0 0.0 500 1000 1500 2000 Stage length (km)
Slide 15: Associate Development
Associate Development airasia.com
Slide 16: Operational Statistics – Thailand
Operational Statistics – Thailand Strong passenger growth – 52% YoY growth Steady cost despite higher fuel prices – 3.26/ASK US cents, constant YoY – 1.63/ASK US cents ex fuel, 10% improvement YoY Lower fares and yields due to challenging operating environment – 13% decline in fares to THB1462 YoY –
Slide 17: Thailand Updates
Thailand Updates Political situation – situation is stable, with the exception in Southern Thai – trade and commerce is not interrupted Foreign ownership issue soon to be resolved – Thai individuals express interest to acquire shares – management opting for a stake Suvarnabhumi Airport – inefficient
Slide 18: Operational Statistics – Indonesia
Operational Statistics – Indonesia Strong passenger growth – 80% YoY growth Higher fuel and marketing increased cost – 2.73 /ASK US cents, 13% increase YoY – 0.85/ASK US cents ex fuel, 26% improvement YoY Higher yields at lower average fares – 5% decline in fares to IDR 286,545 YoY – 31% increase in
Slide 19: Indonesia Updates
Indonesia Updates Jakarta floods – material impact on operations, all flights originate from Jakarta – significant delays and cancellation of flights – aircraft reliability low (older Boeing 737-300 in fleet) ADAM Air crash has dented sentiment to travel – demand for travel muted since crash (tempor
Slide 20: Group Consolidated (Performa)
Group Consolidated (Performa)
Slide 21: Robust Cash Generation
Robust Cash Generation Cash from Operations (RM millions) Net Cash Increase (RM millions) 282 122 100 210 78 145 2006 Q1-07 Q2-07 2006 Q1-2007 Q2-2007
Slide 22: Solid Balance Sheet
Solid Balance Sheet Net Debt (RM million) Net Gearing (Net Debt / Equity) 1.05 0.99 1,396 0.77 1,077 787 2006 Q1-2007 Q2-2007 2006 Q1-2007 Q2-2007
Slide 23: Ancillary Income Developments
Ancillary Income Developments
Slide 24: Driving Growth from Ancillary Income
Driving Growth from Ancillary Income Ancillary % Revenue 1.0 ppt 7.1% Ancillary Income 6.1% Pax Spend (RM/pax) (RM '000) 11% 12.5 87% 2 8 ,4 0 4 Q2-06 Q2-07 11.3 15 ,17 4 Q2-06 Q2-07 Q2-06 Q2-07
Slide 25: Go-Holiday – the one stop online travel portal
Go-Holiday – the one stop online travel portal Go-Holiday Profits RoomsSold (RM '000) 80,000 70,000 2,613 60,000 50,000 40,000 30,000 779 20,000 10,000 - Q1-07 Q2-07 2004 2005 2006 1H-2007 Increasing value chain and strong revenue growth – recruiting more hotel partners to cater future needs – formu
Slide 26: Go-Insure – online travel insurance
Go-Insure – online travel insurance Policy Sold (million) Go-Insure Profits (RM ‘000) 8 1H-07 1,581 6 Q2-07 859 4 Q1-07 722 2 Q4-06 252 0 Q2-06 Q3-06 Q4-06 2006 2007F 2008F 2009F Increasing the take-up rates – unveiling new products (annual travel insurance) – aggressive promotions
Slide 27: Latest Product – In-flight Magazine
Latest Product – In-flight Magazine In-Flight magazine – advertising space to generate revenue – targeting launch by mid 2007
Slide 28: Potential Business Development: CARGO
Potential Business Development: CARGO Current Status – outsource to third party – adhoc basis, reliant on the third party – current load ± 10,800 tons / year @ 8% capacity utilization Proposed Cargo Operations – manage all aspects of cargo operations ourselves (system, marketing, warehousing, aircra
Slide 29: High Profitability and Returns
High Profitability and Returns Company EBITDAR EBIT Net Income ROE (2) Adjusted ROIC (3) Ryanair 35% 25% 20% 15% 7.9% EasyJet 17% 7% 6% 10% 3.9% VirginBlue 22% 10% 6% 16% n/a JetBlue 16% 5% 0% 0% 0% SouthWest 18% 10% 6% 8% 5.4% GOL 28% 18% 15% 26% 10.5% WestJet 25% 15% 7% 14% 4.2% AirAsia 31% 16% 19
Slide 30: Current Issues
Current Issues 1. Why are we buying 200 Airbus? 2. Can balance sheet cope with 200 Airbus? 3. AirAsia X 4. Deferred taxation 5. Management focus
Slide 31: We Need Capacity
We Need Capacity Net Fleet Size at year end What is the new Aircraft Used For? 200 Airbus A320 159 Replacement Boeing 737-300 Frequency 142 150 Addition 125 27 99 100 82 73 72 54 50 50 New Routes 0 2007F 2008F 2009F 2010F 2011F 2012F 2013F Replacement of retirement of old aircraft Capacity to expand
Slide 32: Aircraft Rollout Plan FY2008 to FY2012
Aircraft Rollout Plan FY2008 to FY2012 Deployment Schedule FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 Malaysia Airbus A320 32 43 48 56 64 Boeing 737-300 7 0 0 0 0 39 43 48 56 64 Thailand Airbus A320 6 9 15 24 35 Boeing 737-300 13 13 13 11 4 19 22 28 35 39 Indonesia Airbus A320 6 10 19 31 38 Boeing 737-
Slide 33: Airbus vs. Boeing Cost Comparison (KL to Kuching)
Airbus vs. Boeing Cost Comparison (KL to Kuching) Operating Expenses Airbus Boeing Boeing (US cents / ASK) A320 737-300 737-300 − Staff Cost 0.35 0.39 higher productivity − Fuel and Oil 1.13 1.41 much more fuel efficient − User & Station Charges 0.11 0.12 scalability benefits − Maintenance & Overhau
Slide 34: What is the Balance Sheet Outlook?
What is the Balance Sheet Outlook? Net Gearing (Net Debt/ Equity) Interest & EBITDAR Cover 3.4 3.4 1.7 1.7 3.3 1.6 1.6 1.6 3.2 3.2 3.1 3.0 2.9 2.9 1.0 2.5 Interest Cover EBITDAR Cover NOW 2008F 2009F 2010F 2011F 2012F 2008F 2009F 2010F 2011F 2012F Gearing is unlikely to exceed 3 times in our current
Slide 35: Strategic Link-up with FAX
Strategic Link-up with FAX Why didn’t AirAsia operate long haul alone? – management wants to remain focus to the LCC model – interesting concept, but untested business model (risk reward ratio unfavorable to shareholders) – Independent Board made an assessment and believe securing options to purchas
Slide 36: AirAsia X – benefits to AirAsia
AirAsia X – benefits to AirAsia Financial reward – royalty payments for use of branding Expand brand name to all over the world – leverage the brand reach to all over the world Options to acquire up to 30% of share capital – five years option – purchase at par value
Slide 37: Deferred Taxation
Deferred Taxation Ministry of Finance sent a letter with some clarifications – based on principal, our treatment is acceptable Recognize Investment Allowance as deferred tax assets – to better reflect our financial situation Awaiting official statement from MASB
Slide 38: Management Focus is on other Businesses
Management Focus is on other Businesses Tony Fernandes involvement in other business ventures (Tune Hotel, Tune Money) – personal investment, minority shareholder – non-executive (not involved in day to day operations) – ring fenced approach to AirAsia, monitored by board of directors – board of dir
Slide 39: Looking Forward
Looking Forward airasia.com
Slide 40: Management Guidance for FY2007
Management Guidance for FY2007 Management Guidance for FY2007 OLD NEW Passenger carried (million) 8.0 8.5 Passenger carried by Associates 6 to 7 5.5 to 6.5 (million) Rev / ASK (US cents) Flat Increase 5% - 10% Cost / ASK (US cents) no guidance Reduce 1% - 3% Profit before tax (RM million) positive g
Slide 41: Looking Forward: 2007 Initiatives
Looking Forward: 2007 Initiatives Looking for lower airport charges Investor Relations – new website to be launched soon – webcast of key events – “ask the management” direct email – Investor Day, later in the year
Slide 42: AirAsia - Concluding Remarks
AirAsia - Concluding Remarks World’s lowest cost carrier Level playing field and equal status LCC is now a way of life in Asia Government supports the LCC Airbus improves reliability and performance Aircraft order secures growth pipeline until 2013 AirAsia Academy secures quality skilled manpower re
Slide 43: Appendix
Appendix airasia.com
Slide 44: Note: Change in Accounting Statements
Note: Change in Accounting Statements Previous Current Revenue Ticket sale and other Three main components: revenue - ticket sales - Go-Holiday - other ancillary income Fuel Surcharge Netted off against fuel Incorporated as part of expense ticket sales Cost / ASK With fuel surcharge net Without fuel
Slide 45: Operational Statistics – Malaysia
Operational Statistics – Malaysia Operational Statistics Q2 -2007 Q2 -2006 ∆ (%) (restated) Average Load factor 82% 76% 6 ppt # Passengers 2,273,405 1,343,795 69% Average fare (RM) 164 173 (5%) RPK (mn) 3,060 1,532 64% ASK (mn) 2,505 2,009 52% Rev/ASK (US cents) 3.62 3.27 11% Cost/ASK (US cents) 2.6
Slide 46: Profitability – Malaysia
Profitability – Malaysia Q2-2006 Margins (%) (RM ‘000) Q2-2007 ∆ (%) (restated) Q2-07 Q2-06 Ticket Sales 372,203 231,937 60% Ancillary Income 28,404 15,174 87% Revenue 400,607 247,111 29% EBITDAR 178,068 82,674 109% 44.4% 33.5% EBIT 109,650 46,316 125% 27.3% 18.7% Pretax Profit 93,262 51,880 80% 23.
Slide 47: Operating Expenses – Malaysia
Operating Expenses – Malaysia Operating Expenses % Revenue 1H 2007 1H 2006 (RM ‘000) 1H 2007 1H 2006 Revenue 693,784 442,821 − Staff Cost (70,975) (55,720) 10.2% 12.6% − Fuel and Oil (301,158) (195,376) 43.4% 44.1% − User & Station Charges (43,721) (23,827) 6.3% 5.4% − Maintenance & Overhaul (35,874
Slide 48: Operational Statistics – Thailand
Operational Statistics – Thailand Operational Statistics Q1 -2007 Q2 -2007 (restated) Average Load factor 76% 80% # Passengers 742,899 842,849 Average fare (RM) 177 148 Average fare (THB) 1722 1462 RPK (mn) 694 762 ASK (mn) 907 948 Rev/ASK (US cents) 3.55 3.31 Cost/ASK (US cents) 3.50 3.26 # aircraf
Slide 49: Profitability – Thailand
Profitability – Thailand Q1-2007 Margins (%) (THB million) Q2-2007 (restated) Q1-07 Q2-07 Ticket Sales 1,279 1,232 Ancillary Income 43 57 Revenue 1,322 1,289 EBITDAR 149 172 11.2% 13.3% EBIT 17 35 1.3% 2.7% Net Income 5 33 0.4% 2.6% Profit margin improvement – 13% EBITDAR margins – despite enduring
Slide 50: Operational Statistics – Indonesia
Operational Statistics – Indonesia Operational Statistics Q1 -2007 Q2 -2007 (restated) Average Load factor 84% 83% # Passengers 480,980 505,771 Average fare (RM) 144 108 Average fare (IND) 342,511 286,545 RPK (mn) 493 510 ASK (mn) 586 612 Rev/ASK (US cents) 3. 28 2.80 Cost/ASK (US cents) 3.26 2.73 #
Slide 51: Profitability – Indonesia
Profitability – Indonesia Q1-2007 Margins (%) (IDR million) Q2-2007 (restated) Q1-07 Q2-07 Ticket Sales 164,741 144,926 Ancillary Income 12,553 13,215 Revenue 177,294 158,142 EBITDAR 22,462 22,875 12.7% 14.4% EBIT 3,567 3,644 2.0% 2.3% Net Income 1,918 1,986 1.1% 1.3% Improved operational developmen