AirAsia profit jumps despite 'challenging' climate

Posted at 08/20/2014 11:04 PM | Updated as of 08/20/2014 11:04 PM

KUALA LUMPUR - Malaysia-based AirAsia on Wednesday announced a sixfold increase in second-quarter net profit as Asia's budget travel leader increased revenue despite what it called a "challenging" aviation environment.

Net profit was 367.2 million ringgit ($115 million), up from 58.3 million ringgit in the same quarter of 2013.

AirAsia said the jump was mainly due to foreign exchange gains on borrowings.

But it said revenue also grew five percent to 1.31 billion ringgit as passenger numbers increased slightly.

AirAsia is led by flamboyant boss Tony Fernandes, a former record industry executive who acquired the then-failing airline in 2001. It has seen spectacular success and aggressive growth under his low-cost, low-overhead model.

While its rival Malaysia Airlines faces potential collapse after two disasters this year, AirAsia last month signed an agreement to buy 50 long-haul A330-900neo passenger planes from Europe's Airbus.

The deal is worth $13.75 billion at catalogue prices.

AirAsia CEO Aireen Omar attributed the second-quarter performance in part to moves to cut down on less profitable flights.

She said the airline also held firm on pricing in the face of "irrational" price competition from rivals.

"AirAsia continues to be disciplined in an industry where irrational competition exists," she said in a statement.

AirAsia's success has inspired a host of regional imitators.

Fernandes said in a statement the outlook should improve in the second half of the year, predicting that competitors would move to more "realistic" pricing.

AirAsia said overall results in the quarter would have been better if not for losses suffered by its Thai, Indonesian, and Philippine subsidiary airlines.

Such struggles have not halted Fernandes's expansionist ways.

The company announced last month it would re-enter the Japanese market in a tie-up with e-commerce giant Rakuten, jumping back into the country following its bitter split last year with All Nippon Airways over a budget carrier joint venture.

AirAsia's success over the years has come at the expense of national flag carrier Malaysia Airlines.

The company has been hammered by the double disasters of MH370 and MH17 this year, compounding years of financial losses.

Earlier this month a state investment fund announced it would take over Malaysia Airlines and de-list it from the stock market before a "complete overhaul" aimed at rescuing it from oblivion.

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