Average fares at AirAsia X have fallen by almost a quarter as the long-haul budget carrier lowered ticket prices in a bid to fill seats after embarking on a huge expansion program over the past year.
That additional capacity, particularly to Australia where AirAsia X now flies twice daily to Sydney, Melbourne and Perth, led the airline to a $RM140.1m (A$47.6m) loss for the six months to June 30 2014. The result was a sharp turnaround from the $RM17.9m (A$6.0m) profit in the prior corresponding period.
AirAsia X said in its results presentation released on Tuesday average ticket prices on its scheduled flights tumbled 24 per cent to $RM429 (A$146) in the six months to June 30, compared with $RM564 (A$191) a year earlier.
AirAsia X chief executive Asman Osman-Rani said although the recent capacity expansion had put short-term pressure on earnings performance, “the long-term strategic advantages are very compelling”.
And with the addition of extra frequencies to existing cities and introduction of new destinations to extend the network now complete, capacity as measured by available seat kilometres would now grow in the low single digit percentage range in coming quarters, he said.
“As we approach the end of the year after twelve months since we added a lot of new capacity in 4Q13, we expect RASK (revenue per available seat kilometre) yields to return to positive growth and reach the levels recorded before the expansion,” Osman-Rani said in a statement.
“This in turn will return us back to profitability, particularly as global fuel prices are expected to soften, while Asian currencies are expected to stabilise.”
AirAsia X was planning on cutting back on double-daily services to Perth and Sydney from Kuala Lumpur to 11 to 12 flights a week, according to a research note from CAPA – Centre for Aviation, except for peak travel periods when double daily services return.
The airline group’s Australian operations, which in addition to Perth, Melbourne and Sydney also include services to Adelaide and the Gold Coast, suffered a loss before tax of $RM157.1m (A$53,3m) in the half, compared with a loss of $RM4.4m (A$1.5m) a year ago.
On a positive note, AirAsia X said it has tripled its market share of passengers travelling between North Asia and Australia on a one-stop service, generating a significant new customer base this year compared with the previous year.
CAPA said profitability was unlikely to occur in the third quarter of calendar 2014 given market conditions remained difficult.
“But barring any unexpected upheaval in the market AirAsia X figures should start to gradually improve,” CAPA said in a research note dated August 20.
“Long-term success in the aviation industry is never a sure thing. But despite the rather dismal recent performance its prospects are bright.”