AirAsia X Takes Flight into Q1 2025: Navigating Growth Amidst Shifting Winds

Good day, fellow investors and aviation enthusiasts! AirAsia X Berhad (AAX), the long-haul arm of the AirAsia Group, has just unveiled its First Quarter Report ended 31 March 2025. As we dissect these numbers, a clear picture emerges: the airline is certainly expanding its wings, achieving notable revenue growth. However, this expansion comes with increased operational costs and a dip in profitability compared to the same period last year. Let’s delve into the details and understand what’s truly happening under the hood of this low-cost long-haul carrier.

Core Data Highlights: A Closer Look at the Numbers

Financial Performance Overview

AirAsia X reported a solid increase in revenue, signaling strong demand and operational expansion. However, the bottom line tells a different story, primarily impacted by higher operating expenses and adverse foreign exchange movements.

The decline in profitability is primarily attributable to a significant increase in operating expenses, particularly in maintenance and overhaul costs, which more than doubled from RM125.0 million in Q1 2024 to RM202.8 million in Q1 2025. User charges also saw a substantial rise. While aircraft fuel expenses decreased by 3% due to lower average fuel prices, other operating expenses saw a sharp increase, indicating broader cost pressures. Furthermore, a net foreign exchange gain of RM4.4 million in Q1 2025, while positive, was not enough to offset the substantial foreign exchange loss of RM38.3 million incurred in Q1 2024, impacting the comparative profit figures.

Operational Performance: Flying Higher, But at What Cost?

Despite the profit dip, AAX’s operational metrics paint a picture of robust activity and capacity expansion:

The 12% increase in both seat capacity and passengers carried demonstrates AAX’s successful efforts in ramping up operations. While the load factor remained stable at 83%, the average passenger fare saw a 15% decrease. This suggests a strategy of increasing volume, possibly at lower price points, to fill up the expanding capacity. Crucially, ancillary revenue per passenger grew by 10%, indicating success in monetizing non-ticket services, which is a key strength for low-cost carriers.

Financial Health: Balance Sheet and Cash Flow

Looking at the balance sheet as of 31 March 2025 compared to 31 December 2024, AirAsia X’s total assets increased slightly, driven by higher right-of-use assets. Shareholders’ equity improved by over 15%, moving from RM328.8 million to RM379.2 million, a positive sign of strengthening financial position. The company also managed to reduce its net current liabilities from RM(524.6) million to RM(428.3) million, indicating better management of short-term obligations.

However, the cash flow statement reveals a significant shift. Net cash generated from operating activities turned negative, moving from a positive RM68.3 million in Q1 2024 to a negative RM14.4 million in Q1 2025. This, combined with substantial cash used in financing activities (primarily lease liability repayments), led to a net decrease in cash and cash equivalents of RM106.3 million for the period, compared to a net increase of RM2.8 million in the same period last year. This highlights the capital-intensive nature of the airline industry and the ongoing need for efficient cash management.

Risks and Prospects: Charting the Course Ahead

AirAsia X’s management remains optimistic, setting ambitious internal targets for FY2025:

• Revenue: RM3.5 – 4.0 billion (Q1 2025 Actual: RM0.94 billion – On track)
• EBITDA: RM0.5 – 0.55 billion (Q1 2025 Actual: RM0.12 billion – On track)
• Net Operating Profit (NOP) Margin: 4.5% – 5.5% (Q1 2025 Actual: 5.37% – On track)

The company’s strategy for achieving these targets hinges on several factors:

• Seasonality: Leveraging peak holiday seasons (Q1 and Q4) and localized travel peaks (Q2 and Q3).
• Operational Fleet Size: Expecting 19 operational aircraft by 1H 2025, with one new aircraft operational since May 2025.
• Network Optimization: Expanding connectivity in Central Asia (e.g., Almaty ramp-up) and South Asia, while strategically reviewing less profitable routes like Nairobi.
• Cost Management: Despite higher maintenance checks and the impact of a stronger US Dollar on costs, the Group is focused on prudent cost discipline.
• Strategic Acquisition: The proposed acquisition of Capital A Berhad’s aviation business (including various AirAsia affiliates) is progressing, aiming to create an enlarged aviation group and enhance network synergy.

However, the report also acknowledges ongoing challenges. Geopolitical volatility continues to influence jet fuel prices and foreign exchange rates. While AAX benefited from lower average fuel prices in Q1 2025, the overall operating cost structure remains a key area of focus. Furthermore, a contingent liability related to a tax dispute involving its joint venture, PT. Indonesia AirAsia Extra (IAAX), poses a potential exposure of RM98.4 million, though management believes it’s not probable the company will incur these expenses.

Final Thoughts: The Road Ahead

AirAsia X is clearly at a pivotal juncture, balancing ambitious growth with the realities of a competitive and cost-sensitive industry. The management’s confidence in achieving its internal targets for FY2025, coupled with its strategic corporate exercises, paints an optimistic outlook for the long term.

What are your thoughts on AirAsia X’s latest performance? Do you believe the airline can maintain its growth momentum while effectively managing its costs in the coming quarters? Share your insights and perspectives in the comments section below!