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“Now Everyone Can Fly”“Now Everyone Can Fly”
2005 Second Quarter Results21st February 2005
2005 Second Quarter Results21st February 2005
1
Now Everyone Can FlyDisclaimer
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 FlyAgenda
1. Highlight & Events
2. Results Commentary - Second Quarter 2005
3. Cost Management
4. Outlook
Question & Answers
CONFIDENTIALCONFIDENTIAL
Now Everyone Can Fly
1. Highlight & Events1. Highlight & Events
4
Now Everyone Can FlyHighlights 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 FlyAirAsia in Snapshot
Growth
Low CostPeople
Margin
AirAsiaBrand
6
Now Everyone Can FlyGrowth, Growth, Growth
1,561
2,924
1,354
2,839
1,481
611291
M ar-2001 Jun-2002 Jun-2003 Jun-2004 1Q-2005 2Q-2005 1H-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 fareCapacity rise did not undermine load factor
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Now Everyone Can FlyGrowth, 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
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Now Everyone Can FlyGrowth, 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
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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!
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Now Everyone Can FlyCost Management
2.12.1
2.52.9
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
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Now Everyone Can FlyCost – where we stack against industry?
Source: CSFB
CSFB acknowledge AirAsia as the lowest cost airline company
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Now Everyone Can FlyPeople, 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
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Now Everyone Can FlyTraining – 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 CenterFlight Simulator Center
Cadet Pilot Training SchoolCadet 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 RecruitmentEngineer 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 engineTraining engine”” that produces quality pilots and engineers to support our plannthat produces quality pilots and engineers to support our planned future ed future growthgrowth
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Now Everyone Can FlySimulator Updates
• Scheduled completion: June 26th 2005• Commencement of Operations : July 1st 2005 (from April)
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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 FlyBut how about your Profit Margins?
Profitability Margin (%)
AirAsia
Ryanair
EasyJet
VirginBlue
JetBlue
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
CONFIDENTIALCONFIDENTIAL
Now Everyone Can Fly
2. Second Quarter Results Commentary2. Second Quarter Results Commentary
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Now Everyone Can FlyFinancial 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
EBITDAR 67,843
EBITDA 52,242
EBIT 45,713
Net Income 44,361
Share of Associates (720)
ASK (million)1645
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Now Everyone Can FlyPerformance Indicator
Figures in % Q2 2005 Q1 2005 Q2 2004 FY 2004
261211
372625
291615
EBITDAR MarginEBIT MarginNet Income Margin
382625
Consistent EBITDAR margin improvement
Profitability intact despite loses in Thai AirAsia
This is in-line with seasonality issues of October to December
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Now Everyone Can FlyBalance 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 161493
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
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Now Everyone Can FlyCash Generating Machine
Note:(*) For the 15 months ended June 30, 2002
Cashflow from Operating Activities Cashflow from Operating Activities (RM(RM’’ million)million)
1529
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
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Now Everyone Can FlyOperational 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)
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Now Everyone Can FlyOperational 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
CONFIDENTIALCONFIDENTIAL
Now Everyone Can Fly
3. Cost Management 3. Cost Management
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Now Everyone Can FlyOperating 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
EBITDA
- 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)
EBIT 63,327
Revenue
− Staff Cost
− Fuel and Oil
− User & Station Charges
− Maintenance & Overhaul
− Others
EBITDAR
- Cost of aircraft
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Now Everyone Can FlyCost / 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 ReasonsASK (%)
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%
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Now Everyone Can FlyWhat did we say all these time?
LOWEST COST + LOWEST FARES
= RECIPE FOR SUCCESS
We will keep to our winning ways!
CONFIDENTIALCONFIDENTIAL
Now Everyone Can Fly
4. Outlook 4. Outlook
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Now Everyone Can FlyExpanding 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
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Now Everyone Can FlyCurrent 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 AugustWill not sacrifice business philosophy
High fuel price – AirAsia is hedged until June 2005looking for the opportune moment to renew hedge
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Now Everyone Can FlyTrading 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-ChinaAssuming talks with Government proceeds smoothly, we will commence flights within the short-term
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Now Everyone Can FlyLCC Terminal Resolution
Government Announcement : Wednesday 23rd Februaryeither 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
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Now Everyone Can FlyConcluding 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!
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Now Everyone Can FlyThank You – Question & Answer