Capital A reports profitable Q3, Teleport grows profit

Capital A Berhad, formerly known as the AirAsia Group Berhad, saw its second consecutive profitable quarter after a year of losses in 2021, reporting revenues of 1.9 billion Malaysian Ringgits ($440 million) and EBITDA of $16.35 million for the third quarter, ended Sept. 30. THE BIG PICTURE: Airlines and forwarders in the Asia Pacific region have felt the impact of COVID-19 lockdowns from China and Japan, which have resulted in reduced passenger travel and capacity, and less manufacturing. During the summer, some restrictions lifted and rates rose, providing renewed opportunities for airfreight stakeholders. [caption id="attachment_57131877" align="alignright" width="398"] Photo / Teleport[/caption] BY THE NUMBERS: The company’s aviation sector, AirAsia Group, continues to provide the bulk of its revenue at 88% of total revenue. Teleport, its logistics arm, made up 5.6% of revenue. In Q3: Capital A saw a net loss of $250 million due to non-operating aircraft depreciation and interest expenses; foreign exchange losses totaled $81.8 million against the strong U.S. dollar; AirAsia generated revenue of $413.04 million and EBITDA of $24 million; The airline’s capacity rose to 67% compared with 2019 for domestic sectors and 34% for international sectors; Teleport saw EBITDA of $1.15 million as it transitions from cargo-only flights on converted passenger aircraft to utilizing bellyhold on AirAsia flights and own-freighters ; and The group’s digital branches — airasia Super App, Asia Digital Engineering and Big Pay — added $279 million in revenue. WHAT THEY’RE SAYING: Capital A is expecting inflationary pressure to expand passenger operations. “Any recession will actually be a positive for us in the low-cost aviation space as people trade down to shorter flights and cheaper flights,” Capital A Chief Executive Tan Sri Tony Fernandes said in a Nov. 30 release. “It’s encouraging to see a continuous upward trend for air travel in the final quarter of 2022 with festive seasons and school holidays approaching.” FLASHBACK: Capital A announced Nov. 29 that it would seek an extension to remedy its Practice Note 17 (PN 17) status — a signal of financial distress for a Malaysian business. The group will share its regularization plan in January 2023, with plans for implementation in July 2023. “I have full confidence that we will be in a position soon to remove the PN17 status without involving shareholders’ value dilution, subject to necessary approvals including from Bursa Malaysia Securities,” Fernandes said. NOTEWORTHY: AirAsia is operating around 44% of its fleet but was still able to reach 64% of its Q3 2019 revenues. The group has 125 operating aircraft and expects to end the year with 140 aircraft in service, with the full fleet operating by Q2 2023; Aircraft fuel expenses totaled $210 million, or around 50% of operating costs; AirAsia furloughed during the pandemic, but has 99% of staff back as of November and expects to return to fully staffed by the end of the year; Teleport faced “macro headwinds” but expects profitable growth moving forward as it uses more AirAsia network opportunities; and The logistics arm also expects delivery of three freighters early next year. FUTURE LOOK: Looking ahead, Capital A expects improved performance for its airline sector as oil prices drop and currencies strengthen against the U.S. dollar. Moving forward, the group will spotlight its plan for net zero carbon emissions by 2050. “As the world reopens and we are now recovering from the pandemic, our next key priority is a dedicated commitment to reinforcing our sustainability plan,” Fernandes said. The company will invest in sustainable aviation fuel, carbon offsetting and sustainable fleet management, he added.

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