CAPITALA: Airline Group’s Q2 Earnings Soar on Cost Control, Positive Trajectory Expected

A prominent airline group has reported a robust financial performance for the second quarter of FY2025, with core net profit (PATMI) significantly surpassing expectations. This positive momentum was primarily attributed to effective cost management and strong demand across its aviation operations. Analysts anticipate this positive trajectory to continue into the latter half of the year.

Performance Review

The group recorded a core PATMI of RM192.4 million in 2QFY25, a substantial increase from RM116.2 million in 1QFY25 and a significant positive turnaround from a loss of RM57.6 million in 2QFY24. This performance brings 1HFY25 core PATMI to RM308.7 million, aligning with the investment bank’s forecast and notably surpassing consensus estimates by RM23 million.

The improved results were largely driven by a stronger Malaysia Aviation segment, which benefited from sustained demand, enhanced yields, and ongoing cost optimization efforts. Furthermore, favorable external factors such as lower jet fuel costs and a depreciating USD played a significant role in the year-on-year improvement. Contributions from the group’s non-aviation segments, including higher ADE MRO services, increased Teleport logistics volume, and Santan’s cost efficiencies, also underpinned the positive quarterly earnings.

Operational Landscape and Challenges

Despite the overall positive financial performance, the group experienced some softer utilization rates, as indicated by a decline in load factor compared to previous periods. The digital travel and lifestyle platform segment also saw a year-on-year revenue decline due to competitive pricing and a strategic shift towards domestic travel, which typically yields less than international routes. However, management is actively addressing these by optimizing its network and enhancing digital efficiencies to improve customer experience and operational processing.

Future Outlook and Strategic Initiatives

The investment bank projects a substantially stronger second half of FY2025, buoyed by seasonally robust travel demand, continued USD depreciation, and a favorable outlook for jet fuel prices. The group anticipates full fleet reactivation by the end of 2025, targeting 220 active aircraft, which signals a significant increase in operational capacity and revenue potential. A key strategic development is the ongoing process to exit the regulatory PN17 status, following the pending disposal of the Aviation segment. This transaction is expected to complete in 4QFY25, with the application to exit PN17 status by end-2025. This crucial move is projected to attract higher investor interest and improve market perception.

Debt restructuring initiatives, including a secured Letter of Intent for up to RM1 billion in refinancing, are also underway to optimize finance costs. The non-aviation segments are also poised for growth: the ADE MRO segment’s 16 hangars are fully booked until September 2026, with expansion plans in motion. The digital platform is exploring new licensing and franchising opportunities and reconsidering a Nasdaq listing, while the logistics arm aims to capitalize on peak 4Q volume through network and value-added service enhancements.

Analyst Recommendation

HLIB Research maintains its “BUY” recommendation for the group, with an unchanged target price of RM1.68. The analysts’ outlook remains optimistic, underpinned by robust regional air travel demand, a weaker USD, and declining jet fuel prices, alongside the anticipated positive impact of exiting PN17 status.