Has Airasia X actually improved?

The performance of Airasia X or even Airasia for that matter is very much dependent on the following factors:

• fuel costs;
• load factor i.e. what is the occupancy if I own a hotel; and 
• average revenue per passenger.

It is a no-brainer for Airasia to be performing, ideally fuel costs has to be low, load factor high and of course average revenue per user should be high as well - the higher the better. This is not to say that other costs factor are not important but they are much more manageable. Typically, if one is to do a lot of promotion, average revenue would probably deteriorate while load factor would have improved, and vice versa. Hence, a good strategy would be finding a good balance - good load factor while not sacrificing on average revenue.

In accounting sense however, there is one factor that may also provide a huge variance - forex loss or gain. Just look at the forex loss or gain over the last 7 quarters. Why is the forex changes impacting it so much? Because a large costs including borrowing factor for Airasia X is in USD. In essence, the weaker its revenue based currency against USD, the worse off it would have been - i.e. Ringgit Malaysia against USD. This is basically what Airasia X was against in the past 2 quarters.

income statement for Airasia X over last 7 quarters

If I were to compare the performance over the last 7 quarters against its performance prior to IPO, I would say it has deteriorated after its IPO, but has actually improved in its recent quarters. It actually registered operating losses between 4Q13 to 3Q14 (over 4 quarters) which is a big NO. And for the last 2 quarters, that turned by it posting operating profit and that actually (I would say) improved in the most recent quarter despite the low load factor (74%) due to low advertising effort after the crash of one of its plane in Indonesia in December 2014. One should notice that the higher operating profit in 4Q14 was mainly due to much higher other income (mainly sale of aircraft and others).

Hence, in terms of operating performance, on the overall I would say Airasia X has improved despite some forex challenges that affects its financial performance. For Airasia X to be fully profitable for the year, I think it also depends on how it executes to improve its load factor while maintaining its average revenue per passenger as well as hoping that Malaysian Ringgit does not depreciate further. Lower fuel costs over the long term is also very important towards its performance.

It is however good to see that its performance in reality has actually improved as we do need a second local long and medium haul player despite the challenges.