KUALA LUMPUR (Feb 24): AirAsia X Bhd (AAX), the low-cost, long-haul affiliate of AirAsia Bhd, saw its net loss widened by 27% to RM168.42 million for the fourth quarter ended Dec 31, 2014 (4QFY14), from RM132.60 million in 3QFY14, due to unrealised foreign exchange loss on borrowings and fair value loss on fuel hedging contracts.

This is the airline's fifth consecutive quarterly loss since 4QFY13.

Revenue for the quarter rose 20.4% to RM819.27 million, from RM680.45 million a year ago. No dividends were declared for the quarter.

The group’s total operating expenses for the quarter increased 23.2% to RM889.32 million, from RM721.72 million.

In a filing to Bursa Malaysia today, AAX (fundamental: 0; valuation: 0.3) said as a result of a weakening ringgit, the group had recognised unrealised foreign exchange loss on borrowings of RM67.7 million, and fair value loss on fuel hedging contracts of RM107.2 million in 4Q14, compared to a loss of RM19.9 million and gain of RM5.5 million respectively in 4Q13.

In addition, depreciation of property, plant and equipment doubled to RM43.4 million in 4QFY14, as the group took delivery of four new A330-300 aircraft under finance lease, after the quarter ended March 31, 2013.

For the full year ended Dec 31, 2014 (FY14), AAX reported a net loss of RM519.35 million, compared to RM88.27 million during the previous financial year; although revenue rose 27.3% to RM2.94 billion, from RM2.31 billion in FY13.

The airlines saw its scheduled flights revenue (net of refund), including fuel surcharges, increase 10.4% to RM1.83 billion in FY2014, against RM1.66 billion in FY2013, on the back of increased Available-Seat-KM (ASK) capacity.

AAX’s revenue per ASK capacity (RASK) reduced 0.3%, from 12.06 sen in FY13 to 12.02 sen in FY14, due mainly to the lower average passenger fares, as the group introduced more promotional fares on newly-launched routes during the year. Meanwhile load factor was flat at 82.0%, versus 82.1% in FY13.

The group's total operating expenses for FY14 increased 44.8% to RM3.32 billion, as compared to RM2.30 billion a year ago, partly due to higher staff costs, which rose 33.9% to RM312.7 million, from RM233.6 million in FY13, as headcount rose.

In its filing, AAX said the company is faced with challenges in a difficult industry-wide operating environment.

It said both Datuk Kamarudin Meranun and Benyamin Ismail, who were appointed as group CEO and acting CEO respectively on Jan 30, as part of an on-going reorganization exercise, will lead the turnaround exercise to strengthen the company's balance sheet and maximise profitability.

Their appointment followed the departure of CEO Azran Osman Rani.

"In light of the changing market landscape in the region, where travel demand has softened, our strategy for 2015 — 2016 is to rationalise route frequency to allow capacity introduced in the past two years, to mature," AAX said in its filing.

In this regard, any excess capacity would be reassessed and redeployed as necessary, to new routes or wet leases during lean seasons in the second and third quarters, to reduce the need to lower yields to fill up excess capacity, it added.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)