As at 31 December 2010, AirAsia recorded a 26.01% revenue growth from RM3,133 million in 2009 to RM3,948 million in 2010. This was boosted by increases number of passengers. In 2010, AirAsia Group’s totalled passenger has increased from 22.70 million to 25.68 million passengers. This may resulted from AirAsia’s free ticket campaign as the tickets sold on first day of campaign has increased to 538,000 in 2010. In 2010, AirAsia’s ticket sales have increased to RM2.83 billion, or 72% of AirAsia’s total revenue.
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Revenue was also derived by increased of ancillary income to RM1.1 billion. In 2010, AirAsia has increased average ancillary income per passenger to RM44 by enhanced product offering. Growth in ancillary income was derived from cargo and courier services which increased from RM 79.79 million to RM121.35 million in 2010. Moreover, aircraft operating lease income increased from RM320 million to RM396 million in 2010. (airasia.com)
2010-2011
As at 31 December 2011, revenue growth has decreased to 13.86%. This may resulted from reduction in selling price or promotion. For example, AirAsia offered promotional tickets from RM 3 in July 2011. However, group’s totalled passenger load has risen from 25.68 million to 29.86 million passengers in 2011. Ticket sales have increased to RM3.06 billion, or 68% of AirAsia’s total revenue.
In 2011, ancillary income considered main contributor to group’s revenue due to rise in fuel prices. Ancillary income per passenger has increased to RM45 per passenger in 2011. This was boosted from baggage fees, which increase of 25% compared to 2010. Pick-A-Seat service and Inflight meals also increased by 81% and 33% respectively. (airasia.com)
Figure 1.2: Return on Capital Employed
Source: AirAsia Annual Report (2009,2010&2011)
2009-2010
The return on capital employed has increased from 9.63% in 2009 to 10.68% in 2010. This resulted from the increased of the profit before interest and tax. The profit has increased to RM1,067 million due to higher sales revenue in 2010. Although the oil price has increased to us$91.8 per barrel in 2010, but the profit of AirAsia has risen from RM913 million in 2009 to RM1,067 million in 2010, an increase of 14.9%. (airasia.com)
2010-2011
The return on capital employed has increased to 11.97% in 2011. This resulted from the higher of the profit before interest and tax. The profit has increased to RM1,163 million due to higher sales revenue in 2011. Although the price of oil was increased by 36% in 2011, but AirAsia managed to control costs and increase productivity to achieve a high profit before interest and tax. Also, the increase in profit resulted from using single type of aircraft, Airbus A320 to reduce maintenance fee and pilot training costs. Therefore, the maintenance cost has decreased by RM6 million in 2011. (airasia.com)
Figure 1.3: Gearing
Source: AirAsia Annual Report (2009,2010&2011)
2009-2010
The gearing percentage has fallen from 74.38% in 2009 to 68.33% in 2010. This was due to increased of shareholder’s equity from RM2,621 million to RM3,641 million in 2010, which resulted from issue new shares. In 2010, Airasia increased its ordinary share capital from RM275,774,458 to RM277,343,608 by issue of 15,691,500 ordinary shares of rm0.10 each. The decreased in gearing percentage in 2010 also resulted from increased in retained earnings in 2010, which is an increase of 84.7%. (airasia.com)
2010-2011
The gearing percentage has fallen to 65.85% in 2010. This was due to innovative financing which Airasia has secured for aircraft delivery up to 2013. Besides that, it was due to reduce of borrowings by RM76 million compared to 2010. The long term loans has decreased by RM530 million and the Commodity Murabaha Finance has decreased by RM9 million. Moreover, that was because the group has increased its shareholder’s equity by increase ordinary share capital to RM277,808,558 by issue 4,649,500 ordinary shares of RM0.10 each. The retained earnings also increased by 22.8% in 2011. (airasia.com)
Graph 1.4: Current Ratio
Source: AirAsia Annual Report (2009,2010&2011)
2009 – 2010
The current ratio has increased from 1.3:1 in 2009 to 1.56:1 in 2010. The increased in current ratio in 2010 resulted from increased of current assets by RM653 million. This was due to cash balance highly increased by RM758 million in 2010. Total cash is about RM1.8 billion including deposits on aircraft purchases. The cash equivalents have increased due to increased of deposit with licensed banks to RM 719 million in 2010. (airasia.com)
2010-2011
The current ratio has increased in 2011 to 1.73:1 due to increase in current assets by RM920 million compared to 2011. The main factor that affected the highly increase in current assets was cash and cash equivalents, which increased by RM600 million in 2011. The total cash was about RM2.4 billion including deposits on aircraft purchases. The cash equivalents rose resulted from increased of cash and bank balances to RM1.3 billion.(airasia.com)
Figure 1.5: Interest Cover
Source: AirAsia Annual Report (2009,2010&2011)
2009-2010
In 2009, interest is covered by 3.15 times by the profit whereas interest is covered by 3.27 times by the profit in 2010, an increase of 0.12 times in 2010. This was due to increase profit to RM1,067 million in 2010. Besides that, this was because Airasia managed its borrowings by using derivative financial instruments to maintain fixed interest rate. (airasia.com)
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2010-2011
In 2011, interest cover ratio rose to 3.73 times. This resulted from increased profit to RM1,163 million coupled with decreased net finance payment by RM5 million in 2011. The bank borrowing interests decreased by RM5 million in 2011 resulted in decreased of net finance payments. This was due to reduce term loans borrowings and Commodity Murabaha Finance. Moreover, AirAsia has entered into interest rate swap contracts to convert floating rate into fixed interest rate. (airasia.com)
Figure 1.6: Asset Turnover
Source: AirAsia Annual Report (2009,2010&2011)
2009-2010
In 2010, asset turnover rose slightly from 0.32 times in 2009 to 0.35 times. This indicated AirAsia was able to generate revenue of RM0.35 for every RM1 of assets in 2010. The increased of turnover was due to increase amount of revenue to RM3,948 million in 2010. (airasia.com)
2010-2011
In 2011, asset turnover rose to 0.38 times. This indicated AirAsia was able to generate RM0.38 revenue for RM1 of assets. The increased of turnover was due to grow of revenue to RM4,495 million and decrease non-current assets by RM 254 million. Non-current assets decreased was significantly affected by property, plant and equipment investments, which dropped from RM9.3 billion in 2010 to RM8.6 billion in 2011. Disposal of aircraft engines, airframe and service potential and depreciation charge amounted to RM 1.35 billion and RM521 million respectively. (airasia.com)
Although ratio analysis is very helpful for analyzing financial statements, however use of ratio analysis has certain limitations. Firstly, ratio analysis is calculated on the basis of historical costs. Therefore, the prediction for future may be irrelevant for the company.
Secondly, ratios ignore qualitative factors. For an instance, high current ratio may represent company has sound liquidity position when in fact it may due to large portion of current asset containing inventory.
Lastly, ratios analysis may distorted by inflation. For example, higher revenue growth may indicate that company has improved revenue compared to last year. However, it may have resulted from inflation not improved revenue.
I sincerely hope that the above information will be useful to you. For any further information please do not hesitate to contact me.
Signed: Financial Analyst
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