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A Look at Airasia Group BHD’s 5-Year Track Record and What Lies Ahead

AirAsia Group BHD (KLSE: AIRASIA) is one of the fastest-growing airlines in the region. In 2018, Air Asia accounted for more than half of all of Malaysia’s domestic and international air travel. The group, which is listed on the Malaysia stock market, has increased its total number of destinations consistently each year, and as of 2017, it services a total of 293 routes and 119 destinations. In 2018, the group increased its total carrying capacity by a staggering 21%.

With low-cost carriers revolutionising the way people travel, AirAsia has grown from strength to strength and is even posing a major threat to established flag carriers in the region.

With all of that said, I thought it would be useful to take a trip down memory lane to see how the company has grown over the past five years.

The numbers

Source: Author’s compilation of data from AirAsia Group Berhad’s Annual Reports

What’s behind the numbers

AirAsia Group Berhad has shown amazing consistency in growing its top line year after year. In the period of study, its revenue has almost doubled.

While operating profit has been more erratic, owing to 2018’s sudden decline due to the rise of fuel prices and currency headwinds, there is still a clear upward trend.

All of this has been made more impressive by the company reducing its net debt position each year, while improving its shareholder equity. The fact that AirAsia has also consistently paid dividends during that time frame, including a special dividend every two years, makes its record of growing shareholder equity even more noteworthy.

What lies ahead

As mentioned earlier, AirAsia Group Berhad increased its carrying capacity by 21%. As passenger load has not grown in sync with the sudden increase in capacity, AirAsia had to contend with a lower passenger load factor (a measure of how full its planes are) of 85% compared to 88% in 2017.

This and the additional fuel expenses and currency headwinds this year were the main culprits behind the lower profit this year.

To increase profitability going forward, AirAsia is initiating a headcount cut of 10% and is closing all of its call centres by June of this year.

The Foolish bottom line

AirAsia is one of the fastest-growing airlines in the region. The group has been aggressive in its expansion plans and has been consistently increasing its fleet of aircrafts to increase its passenger load. While operating profit this year dropped due to lower load factor and higher oil prices, Airasia seems to be taking the right steps to maximise profits by focusing on high-margin items like its ancillary services (such as seat allocation, check-in baggage, etc.).

The company’s consistent dividend also makes it an attractive proposition for income-hungry investors. At the time of writing, AirAsia Group Berhad shares trade at RM2.79 per piece. This translates to 11.2 times its 2018 net operating profit and a dividend yield of 4.3%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Jeremy Chia doesn’t own shares in any companies mentioned.