KUALA LUMPUR: AirAsia Bhd returned to the black for the first quarter ended March 31,2015 (1QFY15), after posting a loss for 4QFY14.

The region’s largest budget airline posted a 6.9% increase in net profit to RM149.33 million or 5.4 sen per share for 1QFY15, from RM139.72 million or five sen per share a year ago, as it benefited from lower fuel costs, absence of marketing activities during most of the quarter under review, and a gain on disposal of a 25% stake  in AirAsia Expedia Travel Pte Ltd.

AirAsia’s revenue fell by a marginal 0.4% to RM1.297 billion for 1QFY15, compared with RM1.302 billion for 1QFY14.

The airline attributed the lower quarterly revenue to average fare falling by 9%, despite a 3% increase in passenger volume.

“This was partially contributed by the overall improvement in passenger volume from China,” it said.

Passenger volume from China was hampered last year due to the disappearance of Malaysia Airlines (MAS) flight MH370.

“During challenging times such as the one we faced, maintaining a disciplined cost structure proved to be an effective strategy yet again,” AirAsia chief executive officer (CEO) Aireen Omar  said in a statement yesterday.

“Although revenue per available seat-kilometre saw a decrease of 9% year-on-year (y-o-y), mainly due to lower load as a result of the absence of marketing, ancillary revenue as a whole increased 7% y-o-y, driven by a 4% increase in baggage fees which remained the largest contributor, followed by cargo and assigned seats,” Aireen said.

For 2QFY15, AirAsia (fundamental: 0.2; valuation: 0.8) sees strong demand with average load factor forecast at 80%.

AirAsia also said that the outlook for 2QFY15 should be seen in the context of the price of jet fuel.

“A lower fuel price has obvious benefits for the airline industry, but the lower prices have been partially offset by weaker currencies against the US dollar across all Asean nations,” the airline said.

“However, barring any unforeseen circumstances, the directors remain positive about the prospects of the group for 1QFY15 and the remainder of the year,” AirAsia said.

Commenting on the outlook, AirAsia group CEO Tan Sri Tony Fernandes said one of the catalysts is a more rational market in Malaysia, following the restructuring of MAS.

“The restructuring of MAS will bring about a healthier competition environment, which will be good for all industry players and for the consumers themselves,” he said in a statement.

“Airline operators in general are now a bit more disciplined in their capacity management, setting the stage for a better operating environment in 2015,” Fernandes added.

He also revealed that AirAsia has no plans to raise money from the equity market as it is currently in a good cash position. As at March 31, AirAsia’s deposits, bank and cash balances stood at RM1.6 billion, up almost 20% from RM1.34 billion as at Dec 31 last year.

Fernandes also mentioned that the group had hedged 50% of its fuel requirement for 2015 at an average cost of US$88 (RM320.32) per barrel to take advantage of the favourable cost environment.

“We also continue to lobby for lower airport charges across the region, and we have seen some good progress in Langkawi, Malaysia and Singapore, and positive signs for Indonesia, Thailand and the Philippines,” he said.

AirAsia shares closed one sen or 0.48% lower at RM2.08 yesterday, with a market capitalisation of RM5.82 billion.

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This article first appeared in The Edge Financial Daily, on May 29, 2015.