Now Everyone Can Fly Now Everyone Can Fly 2005 Second Quarter - - PowerPoint PPT Presentation

“Now Everyone Can Fly” “Now Everyone Can Fly”

2005 Second Quarter Results 21st February 2005 2005 Second Quarter Results 21st February 2005

1

Now Everyone Can Fly

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 nor our advisors make any representation regarding, and assumes no responsibility or liability for, the accuracy or completeness of, or any errors or omissions in, any information contained herein. In addition, the information contains projections and forward-looking statements that reflect the company’s current views with respect to future events and financial performance. These views are based on current assumptions which are subject to various risks and which may change over

• time. No assurance can be given that future events will occur, that projections

will be achieved, or that the company’s assumptions are correct. Actual results may differ materially from those projected. This presentation is strictly not to be distributed without the explicit consent of Company management under any circumstance.

2

Now Everyone Can Fly

Agenda

• 1. Highlight & Events
• 2. Results Commentary - Second Quarter 2005
• 3. Cost Management
• 4. Outlook

Question & Answers

CONFIDENTIAL CONFIDENTIAL

Now Everyone Can Fly

1. Highlight & Events 1. Highlight & Events

4

Now Everyone Can Fly

Highlights and Events

5 new routes added in the quarter

• entered a new country (Macau)

Purchase Indonesian Airline

– securing foundation of growth potential in Indonesia

Thai-AirAsia (expanding the model outside of Malaysia) 80 Airbus Order Concluded

– guarantees continues supply of aircraft and secures low cost structure

Initial Public Offering Launched AirAsia to be inducted in MSCI Emerging Market Index, 1st March

5

Now Everyone Can Fly

AirAsia in Snapshot

Growth Low Cost People Margin

AirAsia Brand

6

Now Everyone Can Fly

Growth, Growth, Growth

1 ,561 2,924 1 ,354 2,839 1 ,481 61 1 291 M ar-2001 Jun-2002 Jun-2003 Jun-2004 1 Q-2005 2Q-2005 1 H-2005

Passengers Flown Passengers Flown ( (‘ ‘000) 000)

Market can’t have enough of our low fares

• first half passenger flown exceeded full year 2004 passenger carried

Passenger numbers rising despite increase in average fare Capacity rise did not undermine load factor

7

Now Everyone Can Fly

Growth, Growth, Growth

Thailand Statistics Q2 -2005 Q1 -2005 Q4 -2004

84% 74% 230,831 99 2.83 182 247 3 369,340 99

Cost / ASK (US cents)

2.57 3.14 314 371

# aircraft (end)

6 4 77% 434,865 115 409 544

Average Load factor # Passengers Average fare (RM) RPK (mn) ASK (mn)

Within a year, we are now the market leaders in Thailand Strong passenger growth with improving yield and lowered cost

8

Now Everyone Can Fly

Growth, Growth, Growth: Indonesia

Entry to Indonesia way ahead of initial timeline estimates Indonesia potential is enormous,

(>200 mill population, 17000 islands, minimal competition)

Fleet currently 2 planes, brought from the Malaysian operations Indonesia is not computed in prospectus

9

Now Everyone Can Fly

“How is your Cost / ASK so low?”

Operating Expenses Cost/ ASK Reason (US cents) AA Others*

Staff cost 0.29 1.16 Superior productivity & low cost region Fuel and Oil 1.11 1.03 Positive oil hedge benefits Maintenance & Overhaul 0.17 0.38 LT contracts at attractive levels Cost of aircraft 0.25 0.50 Lock in aircraft at bottom cycle Depreciation & Amort’n 0.10 0.18 Fleet biased toward lease than owned

Others 0.21 2.58 Asian charges are much lower TOTAL cost per ASK 2.13 5.83 63% Cheaper than Direct Peers

Others: Gol, JetBlue, Southwest,, VirginBlue, EasyJet

It’s not a myth! It’s only a mirage if you can’t see it!

10

Now Everyone Can Fly

Cost Management

2.1 2.1 2.5 2.9 3.4

2002 2003 2004 Q1 2005 Q2 2005

Cost / ASK (US cents) Cost / ASK (US cents) 1.3 cents cost reduction since begin operations

Superior cost containment and more to come – biggest caveat is oil price

11

Now Everyone Can Fly

Cost – where we stack against industry?

Source: CSFB

CSFB acknowledge AirAsia as the lowest cost airline company

12

Now Everyone Can Fly

People, People, People

Focus on quality and service is essential to ensure continuous supply of quality staff and avoid slip-up Training Centre aka AirAsia Academy

• ensure high quality rollout of staff without major cost exposure
• continuous improvement courses to ensure we’re always up to date
• keen-eye to improve quality, wherever possible

Aircraft simulator

• investment for future indigenous pilots
• Pioneer ‘Pilot Cadet Program’ batch will graduate in June 2005

13

Now Everyone Can Fly

Training – The Bottleneck of Growth

Own flight simulator complex under construction at KLIA 10-year aviation agreement with CAE Labuan Alleviates AirAsia’s dependence on third parties for it’s pilots type-rating training

Flight Simulator Center Flight Simulator Center Cadet Pilot Training School Cadet Pilot Training School

Introduced own Pilot Cadet Training Program in December 2003 Cadet pilots are recruited and enrolled in the Malaysian Flying Academy First group of 17 pilots are expected to graduate in May 2005

Engineer Recruitment Engineer Recruitment

Arrangement with Aero Precision Resources Training center uses AirAsia’s aircraft and facilities to train potential engineers Allows AirAsia to identify and select engineers for recruitment Selected engineers are given an allowance for type-rating training, with a bond to AirAsia for 3 - 5 years

“ “Training engine Training engine” ” that produces quality pilots and engineers to support our plann that produces quality pilots and engineers to support our planned future ed future growth growth

14

Now Everyone Can Fly

Simulator Updates

• Scheduled completion: June 26th 2005
• Commencement of Operations : July 1st 2005 (from April)

15

Now Everyone Can Fly

Recruiting the Best People

• adding value to our organization

Kathleen Tan (Executive Vice President – Commercial)

• Specialist in arrears of marketing, communications, brand
• management. Over 20 years experience in Asia-Pacific region.

Senjaya (Chief Executive Officer; Indonesia)

• Previously in the music industry. Impeccable brand development

aptitude and management skills Rozman (Chief Financial Officer; Indonesia)

• Sound financial experience; previously in KLIA

John Chang (Executive Vice President – Greater China & North Asia)

16

Now Everyone Can Fly

But how about your Profit Margins?

Profitability Margin (% ) Air Asia Ryan air Easy Jet Virgin Blue Jet Blue South West AVERAGE

EBIT 25 25 5 11 9 9

13.9

Source: AirAsia; Bloomberg; latest company reports

AirAsia possesses among the best profit margins

CONFIDENTIAL CONFIDENTIAL

Now Everyone Can Fly

2. Second Quarter Results Commentary 2. Second Quarter Results Commentary

18

Now Everyone Can Fly

Financial Highlights – Q2 2005

Year End : June

Figures in RM ‘000, unless otherwise stated

Q2 2005 Q1 2005 Q2 2004 ∆

Q2:Q1(O5)

∆

Q2:Q2(04) 106,477 + 42% + 107% + 156% + 194% + 80% + 323%

+ 24%

39,631 + 68% + 71% + 84% + 68% + 64% 28,448 27,195 26,976

842 + 95%

125,479 32,786 20,442 15,508 (3,300) 10,478

1326 Revenue

178,633

EBI TDAR

67,843

EBI TDA

52,242

EBI T

45,713

Net I ncome

44,361

Share of Associates

(720)

ASK (million) 1645

19

Now Everyone Can Fly

Performance Indicator

Figures in % Q2 2005 Q1 2005 Q2 2004 FY 2004

26 12 11 37 26 25 29 16 15

EBI TDAR Margin EBI T Margin Net I ncome Margin

38 26 25

Consistent EBITDAR margin improvement Profitability intact despite loses in Thai AirAsia This is in-line with seasonality issues of October to December

20

Now Everyone Can Fly

Balance Sheet

Note: (*) For the 15 months ended June 30, 2002

Balance Sheet Balance Sheet (RM (RM’ ’ million) million)

899 60 35 46 29 17

• 582
• 105

150 161 49 3 Mar-01 Jun-02 Jun-03 Jun-04 Sep-04 Dec-04 SHR Equity Net Debt

(*)

Post IPO

IPO proceeds renders a very strong balance sheet

21

Now Everyone Can Fly

Cash Generating Machine

Note: (*) For the 15 months ended June 30, 2002

Cashflow from Operating Activities Cashflow from Operating Activities (RM (RM’ ’ million) million)

15 29 56 7

• 3
• 12
• 19

82 Mar-00 Mar-01 Jun-02 Jun-03 Jun-04 Q1-05 Q2-05

(*)

“Normalized CFO” is RM82m. RM75m is paid for aircraft and fuel

• deposits. Therefore CFO is ‘superficially’ depressed at RM7m

22

Now Everyone Can Fly

Operational Statistics

Operational Statistics Q2 -2005 Q1 -2005

75% 77% 984,621 122 1017 1326 2.48 3.27 2.08 12

# aircraft (end)

19 15 1,126,393 153 1230 1645 2.86 3.82

Cost/ ASK (US cents)

2.13 + 2.4%

Average # aircraft

16.7 18

∆ q-o-q Average Load factor # Passengers

+ 14%

Average fare (RM)

+ 25%

RPK (mn)

+ 21%

ASK (mn)

+ 24%

Rev/ ASK (US cents)

+ 15%

Rev/ RPK (US cents)

+ 17%

# aircraft (beginning)

23

Now Everyone Can Fly

Operational Statistics

Passenger volumes increased by 14% over preceding quarter Load factor affected by huge inputs of new capacity, markets requires time to consume new capacity ASK increased by 24% as a relation to new aircrafts, increased frequency and addition of new destinations Superior cost containment despite rising fuel price. Cost savings attained via economies of scale and increased productivity Yields improved due to strong demands

CONFIDENTIAL CONFIDENTIAL

Now Everyone Can Fly

3. Cost Management 3. Cost Management

25

Now Everyone Can Fly

Operating Expenses

Operating Expenses (RM ‘000) First Half -2005 % Revenue 304,112

11.2 37.4 4.8 9.8 3.8

33.1

9.2

EBI TDA

• Depreciation & Amortisation

82,685

(11,464)

27.2

3.8

20.8

(33,940) (113,613) (14,645) (29,859) (11,426)

100,632

(27,945)

EBI T 63,327 Revenue − Staff Cost − Fuel and Oil − User & Station Charges − Maintenance & Overhaul − Others EBI TDAR

• Cost of aircraft

26

Now Everyone Can Fly

Cost / ASK – what changed from last year to this year?

Q2 2005 : 2.44 vs. Q2 2004 : 2.13 ( 13.0% improvement )

(US cents) Cost per Contribution Reasons ASK (% )

Staff cost 0.29

• 8.8 Improved productivity

Maintenance & Overhaul 0.17

• 12.9 Good LT contracts

Other costs 0.07

• 6.3 Disciplined cost containment

Cost of aircraft 0.25

• 4.1 Economies of scale benefits

Fuel and Oil 1.11 13.0 Oil Hedge benefits User & Station Charges 0.14 3.6 More regional routes Depreciation & Amortization 0.10 2.7

Total Cost per ASK 2.13

• 13.0%

27

Now Everyone Can Fly

What did we say all these time?

LOWEST COST + LOWEST FARES = RECIPE FOR SUCCESS

We will keep to our winning ways!

CONFIDENTIAL CONFIDENTIAL

Now Everyone Can Fly

4. Outlook 4. Outlook

29

Now Everyone Can Fly

Expanding Ancillary Income

Go Holiday – AirAsia’s holiday package option

• customers increasingly comfortable with Go-Holiday
• developing other opportunities

Advertising – paying homage to our strong brand AirAsia credit card – partner with RHB and DBS Snack Attack – AirAsia’s onboard food & drinks Merchandise – duty free options and company souvenirs New sources under consideration

• insurance (travel & life)
• car rental

30

Now Everyone Can Fly

Current Trading Conditions and Outlook

Aircraft delivery schedule under backlog

• Availability of attractively priced Boeing 737-300 is increasingly

scarce and lease rates have been hardening

• demand for B737-300 is rising, particularly from Cargo airlines
• delay in aircraft delivery will have a financial impact
• current fleet 28 aircraft; another 12 aircraft LOI already signed

but delayed delivery up to August Will not sacrifice business philosophy High fuel price – AirAsia is hedged until June 2005 looking for the opportune moment to renew hedge

31

Now Everyone Can Fly

Trading Conditions & Outlook: Thailand

Aircraft planned for Thailand deployed to Indonesia & Malaysia

• less critical mass but less aircraft

Yield and load factors improved, further potential in store

• more rationale competition
• our brand has achieved dominion status

Model is working well but less aircraft Final stages before launching flights to China, Indo-China Assuming talks with Government proceeds smoothly, we will commence flights within the short-term

32

Now Everyone Can Fly

LCC Terminal Resolution

Government Announcement : Wednesday 23rd February either way, it will be good news for AirAsia Government has listened to us tentatively and gathered inputs, should new terminal be built in KLIA

• low cost facilities (potential to save up to 30% of manpower cost)
• simplicity of design to ensure high operational efficiency
• should mimic or similar cost structure if operate from Subang
• construction should be swift, <1 year

33

Now Everyone Can Fly

Concluding Remarks

Very strong quarter (good volume growth, strong average fare, good profit margins) Excellent cost control (despite the oil price boom) Low fares + lowest cost = impressive margins Business outlook reliant to these factors

• aircraft delivery schedule
• sentiments for travel
• oil price (high oil price is a concern)

We will stick to our model. Do not believe sacrificing MODEL in order to address short-term cyclical aversions. Long-term benefit for the business is paramount!

34

Now Everyone Can Fly

Thank You – Question & Answer