Skift Travel News Blog

Southeast Asian budget airline AirAsia was back in the black in the second quarter but its rebound was slowed by the global shortage in aircraft parts and other supplies.

The aviation business of Malaysia-based Capital A, which includes subsidiaries in Indonesia, Malaysia, the Philippines, and Thailand, posted an earnings before interest, taxes, depreciation, and amortization (EBITDA) profit of $87 million (405 million Malaysian ringgit) in the June quarter. That was more than double the result last year, and down just 7% from its 2019 profit. The group took full control of its four subsidiaries, consolidating them under the AirAsia Aviation Group name, during the quarter.

The profit growth was buoyed by unit revenues, or the amount AirAsia makes flying a passenger one kilometer, that were up 32% from 2019 levels. Lower than expected capacity, which stood at 74% of pre-Covid levels, helped drive the unit revenue increase.

The airline flew just 146 aircraft at the end of June, or about 54 fewer than in 2019. It attributed that number to the supply chain shortages affecting the industry globally and added maintenance needs as it fleet ages.

AirAsia plans to reactivate its remaining 54 aircraft by the end of the year, it said. A new subsidiary in Cambodia, AirAsia Cambodia, is set to launch imminently, AirAsia Aviation Group CEO Bo Lingam said.

The airline is preparing for its seasonally stronger third and fourth quarters, with unit revenues expected to rise through the end of the year. That could drive higher revenue and profits at Capital A as long as potential cost increases do not exceed the revenue improvements.

Capital A as a whole reported an EBITDA profit of roughly $100 million. And while its airlines were by far its largest businesses, newer segments like its Superapp saw revenue double from last year to $19 million; EBITDA profit for the app business was $8.6 million.

AirAsia Aviation Group on Friday announced a joint venture with Cambodia-based Sivilai Asia to launch a new low-cost carrier — AirAsia Cambodia.

The airline, in which AirAsia will be the majority partner, expects to commence operations in late 2023.

Cambodia is the fifth Southeast Asian destination that AirAsia will be foraying into after Malaysia, Indonesia, Thailand and the Philippines.

Speaking to the media, Tony Fernandes, CEO of Capital A, AirAsia’s parent company, said all of the group’s future airlines would be based in the region as this is an area they know best and have a strong brand presence.

In 2020, the aviation group shut down operations of AirAsia Japan and last month the company announced that it has sold off its remaining 16.67 percent stake in AirAsia India to Tatas-owned Air India.

AirAsia plans to touch pre-Covid levels by the second quarter of 2023 and in true Tony Fernandes style the Capital A CEO said he’s confident AirAsia Cambodia would be profitable “from the get go.”

“Cambodia is a market that is familiar to us and where we have deep infrastructure in place,” Fernandes said.

AirAsia Aviation Group is the largest foreign airline and the second largest airline group overall operating into Cambodia in terms of capacity, according to group CEO Bo Lingam.

Pre-pandemic, AirAsia operated 90 weekly flights from Malaysia and Thailand to Cambodia and is currently flying about 49 weekly flights.

“The value of AirAsia’s network is an insurmountable asset; it will be another flag of extensive connectivity in Cambodia and into the region, namely China, India and North Asia,” Fernandes said.

Currently, there are no direct flights between India and Cambodia.

Reacting to earlier reports of a proposed merger of AirAsia and AirAsia X, Fernandes had clarified on Monday that the group proposed to form a separate aviation group comprising all its airlines.

Malaysia’s Capital A will not be merging its airlines, but will instead move all the carriers under one existing structure, similar to how British Airways, Iberia Airline, and Aer Lingus operate under the International Airlines Group umbrella, said CEO Tony Fernandes on Monday.

AirAsia X will be renamed AirAsia Aviation Group and there will be six airlines under it — AirAsia Malaysia, AirAsia Thailand, AirAsia Philippines, and AirAsia Indonesia, as well as AirAsia X Malaysia and AirAsia X Thailand.

“We are just injecting AirAsia airlines into AirAsia X’s listing status, there is no merger,” Fernandes told the media.

He said that each airline would continue to operate independently.

Fernandes made the statement to the media on the sidelines of the launch of Capital A’s upgraded subscription service — Super +.

AirAsia had earlier launched the flight subscription service in March to provide unlimited flights to destinations across Southeast Asia. Monday’s launch will now include destinations in Japan, Korea, Australia, India, Maldives, New Zealand, Hong Kong, Taiwan and Saudi Arabia.

Capital A has launched two versions of the subscription service — Super+ Lite, which covers unlimited flights across all Southeast Asian destinations very similar to the version launched in March, while the Super+ Premium includes all countries operated by the AirAsia airline group, including long-haul destinations.

The lite version is priced at $203, while the premium option comes at $524.

“Till date, over 100,000 Super+ subscribers have redeemed over 500,000 flight seats across Southeast Asian destinations,” Capital A said in a release.

While flight bookings opened from Monday, the earliest flights that subscribers could opt for was from January 1, 2023.

“This is what we have been preparing for — the return of travel, and we are excited about the reopening of markets like Japan, South Korea, Taiwan, Hong Kong and more to come in the near future,” Fernandes said.

Malaysia’s Capital A has submitted plans for a corporate restructuring, which will involve the merger of its low-cost airline AirAsia with long-haul carrier AirAsia X.

The company will set up a new division, called AirAsia Aviation, which will be run by Bo Lingam, who is currently president, airlines and group CEO of AirAsia Aviation Group Limited.

Capital A will then also include two other portfolios: the digital businesses and the logistics plus aviation services. They will be managed by Captial A CEO Tony Fernandes, who stepped down as acting group CEO of AirAsia X earlier this month.

The group also wants to carry out a separate “spin-off listing” in the future for the aviation services businesses of Capital A.

The corporate restructuring is designed to help it exit its “PN17” status, given to it by Bursa Malaysia, Malaysia’s stock exchange, which classifies it as a financially-distressed firm.

“We were at the sharp end of Covid, as were many airlines around the world, but we are coming out of it stronger than before — our airlines and network are fast returning to pre-pandemic levels, and our digital businesses are performing better than many had expected,” Fernandes said in a statement.

“While our PN17 status remains an accounting issue and does not accurately reflect the business viability and prospects of Capital A, we have nevertheless worked very hard to develop a plan to address the PN17 status as a key part of our post-pandemic recovery journey.”

Capital A aims to submit its proposal to Bursa Malaysia for approval in February 2023.

Formerly known as AirAsia Group, Capital A has become an investment holding company with a  portfolio of business that includes its airasia superapp, which saw monthly active users reach more than 10.6 million in the second quarter of this year. It also operates fintech firm BigPay.

AirAsia X recently resumed flights between Kuala Lumpur and Jeddah in Saudi Arabia.

Budget carrier AirAsia India is likely to be merged with Air India Express by the end of 2023. An operational review process is underway to integrate the two carriers, Air India said in a statement this week.

The merger news follows Malaysia-based AirAsia Aviation Group’s announcement on Wednesday that it has sold off its remaining 16.67 percent stake in AirAsia India to Tatas-owned Air India.

The agreement that will fetch AirAsia $18.83 million, also states that AirAsia India can continue to use the ‘AirAsia’ brand name for 12 months.

Aimed at having a single low-cost carrier for the Air India group, following the merger the entity will be branded as Air India Express, a statement read.

In June, Indian watchdog Competition Commission of India had approved the proposed acquisition of the entire shareholding of AirAsia India by Air India.

Following the acquisition of Air India and Air India Express in January, the Tata Group now owns four airlines — Air India, Air India Express, AirAsia India and Vistara. Vistara is a joint venture with Singapore Airlines.

In a recent interview with Skift the Vistara CEO when asked about a possible merger between the airlines under the Tata fold had said that there are certain discussions that have been happening which he is not privy to.

Commenting further on AirAsia selling off its remaining stake to Air India, Group CEO of AirAsia Aviation Group, Bo Lingam, said Covid has allowed them to re-examine priorities, and the group feels it is best suited for AirAsia to develop an Asean-only business with airlines in Malaysia, Thailand, Indonesia and the Philippines.

“We will use the experience and knowledge we have gained from operating in the Indian domestic market to grow the Asean-Indian market in logistics and passenger services to a far greater extent,” Lingam added.

Launched in 2014, AirAsia India currently flies to 18 destinations with a market share of 5.9 percent.

As travel recovers in Southeast Asia, the AirAsia superapp saw the ranks of its monthly active users reach more than 10.6 million in the second quarter with an assortment of services, Capital A stated Monday in releasing the airline group’s preliminary operating statistics.

On the digital front, the AirAsia superapp saw its monthly active users rise 236 percent year over year to more than 10.6 million in the quarter that ended June 30, and that represented a 70 percent jump compared with the first quarter. Category leader Grab in Singapore had about three times the number of users in the first quarter, which was the latest statistics available.

Capital A, formerly known as AirAsia Group Berhad, said the rise in its monthly active users can be attributed to “the strong return of travel” and efforts to attract new users for the mobile app.

Transactions, boosted by increases in flights, ridesharing, the Kiwi.com-powered booking of airlines outside the group, and the company’s subscription discount service Super+, rose 524 percent to nearly 4.9 million in the second quarter.

The release of these preliminary operating statistics did not include revenue numbers or transaction values.

Capital A’s BigPay fintech offering, with new products such as the DuitNow QR code merchant payments and money transfers, saw the number of customers with an active card increase 62 percent year over year to more than 1.2 million.

The company’s logistics business, Teleport, saw its cargo tonnage fall 27 percent year over year because of the tough lockdowns in China that began in March. Deliveries, however, soared 630 percent year over year to 1.15 million because of a new e-commerce platform that the company began using during the second quarter, Capital A said.

Malaysia-based Capital A said its passenger numbers in the second quarter leaped 633 percent, and its load factor of 84 percent was its highest since 2020.