EMERGING from a debt restructuring exercise and being effectively debt-free, beleaguered AirAsia X Bhd could emerge a listed beneficiary of high air cargo rates, according to Maybank IB Research.
This comes on the heel of the sister airline to Capital A Bhd (formerly AirAsia Group Bhd) having announced a major new air logistics partnership with Geodis Malaysia Sdn Bhd to provide air cargo capacity.
“Thanks to surging air cargo rates, MAS Kargo and Raya Airways have been generating large profits,” analyst Yin Shao Yang pointed out in a Malaysian aviation sector update. “In FY2018A, MAS Kargo generated only RM33.2 mil in net profit and Raya was loss-making.”
However, MAS Kargo generated a whopping RM351.1 mil in net profit in FY2020A while Raya generated RM99.7 mil in core net profit.
“Yet, air cargo rates climbed even higher in FY2021A, suggesting that both companies generated even higher profits in FY2021A,” observed Maybank IB Research.
“In our view, Raya is especially noteworthy given that it operates only four very old planes (average age 35 years) and yet managed to generate nearly RM100 mil in core net profit in FY2020A and likely generated even more profits in FY2021A.”
So how can the long-haul budget carrier seize the opportunity to emerge a listed air cargo play?
“For added flexibility, AirAsia X will not have to pay lessors if it does not fly over the next two years,” justified Maybank IB Research. “Going forward, AirAsia X will reduce its fleet size to 13 but it will still be more than three times that of Raya and pivot from passenger to cargo.”
Currently, five AirAsia X planes are operational but moving forward, the low-cost airline expects to have 13 planes operational by mid-2022. “AirAsia X believes that it can be profitable with only six planes operational,” noted Maybank IB Research.
While AirAsia X has stated that it is pivoting to cargo, the airline will cater to passengers who are flying to destinations that it serves on its cargo routes.
In effect, AirAsia X will carry both passengers and cargo to improve profitability. On Jan 31, it announced that it will resume passenger flights between Kuala Lumpur and Sydney on Feb 14. Sydney is one of the destinations that AirAsia X serves on its cargo routes.
“Thus, this follows that AAX may resume passenger flights between Kuala Lumpur and Hong Kong, Seoul, Bangalore, Mumbai, Chennai and Shanghai,” added Maybank IB Research.
At 11.30am. AirAsia X was down 5.5 sen or 10% to 49.5 sen with 2.5 million shares traded, thus valuing the airline at RM205 mil. – Feb 10, 2022
