KUALA LUMPUR (May 27): AirAsia X Bhd (KL:AAX), which is in the process of taking over its sister company Capital A Bhd’s (KL:CAPITALA) aviation business, has reported a 75.6% decline in first quarter net profit due to elevated operating expenses despite a jump in revenue.

Some of the significant increase in expenses included staff costs, aircraft fuel expenses, maintenance and overhaul, user charges, and aircraft lease expenses, said the group in its bourse filing on Monday.

As a result, net profit for the quarter ended March 31, 2024 (1QFY2024) came down to RM80.12 million, from RM327.99 million a year earlier.

In contrast, quarterly revenue rose 65.6% to RM908.92 million from RM548.84 million in 1QFY2023, primarily generated from more ticket sales and ancillary revenue.

Ancillary revenue includes baggage fees, assigned seats, cancellations, documentation and other fees, and on-board sale of meals and merchandise.

As of March 31, AAX’s fleet size stood at 18 aircraft with 16 activated thus far. The group expects to activate another aircraft in July and a final one in November.

The activation of its full fleet, AAX said, is imperative for the implementation of the group’s network strategy, including the continued relaunch of key profitable routes in China. On top of that, the group is also looking to add new destinations in other regions, despite the elevated costs.

“With the recent announcement of the visa-exemption policy to China until 2025, the group aims to capitalise on the potential the market has demonstrated historically. Additionally, the group is also assessing new destinations to be incorporated into its network and is pleased to share that apart from, most recently, Central Asia, the group also looks forward to soon bridging the connectivity for more regions,” it said.

Acquisition of Capital A’s aviation business

On its proposed acquisition of Capital A’s aviation business, which was announced on April 25, AAX said the group will gain access to an order book with over 400 aircraft deliveries, providing the enlarged group with “unbounded expansion opportunities” at a time when growth opportunities are limited due to bottlenecks in the aircraft manufacturer’s supply chain which in turn delayed aircraft deliveries.