Capital A's Third Quarter 2024 Revenue

Capital A's Q3 2024

Capital A Berhad (“Capital A” or the “Group”) has reported its unaudited financial results for the third quarter ended 30 September 2023 (“3Q2023”).

The Group, which includes the Aviation Group and Capital A Companies—Asia Digital Engineering (ADE), Capital A Aviation Services (CAPAS), Teleport, MOVE Digital, and Capital A International—reported a solid net profit of RM2.01 billion for the quarter. This figure was boosted by a significant foreign exchange gain exceeding RM2 billion. 

In terms of core performance, the Group achieved a net operating profit of RM9.9 million, supported by revenue of RM4.9 billion and RM640 million in EBITDA. This represents year-on-year (YoY) increases of 17% in revenue and 43% in EBITDA, respectively.

Highlights of 3Q2024 of the Aviation Group: 

Despite being a seasonally slow quarter, the airline business delivered strong results as revenue increased by 15% YoY to RM4.5 billion, while EBITDA surged 50% YoY to RM577 million, achieving a healthy 13% EBITDA margin. This positive performance was driven by strong travel demand, favourable fuel prices and the strengthening of the Malaysian Ringgit (“MYR”) against the US Dollar (“USD”). This was achieved despite still having non-active aircraft. Including these non-active aircraft, the Aviation Group would record an additional EBITDA of RM195 million. The business recorded a net operating loss of RM42 million at the operating level. 

• The total fleet grew to 221 aircraft during the quarter, with 181 aircraft available for operations, including spares. Once all aircraft are reactivated, the total active fleet will be 205 by the end of 2024. Capacity growth and passengers carried have already increased by 8% YoY, and the full reactivation of the fleet will further enable the Aviation Group to capitalise on surging travel demand, expand high-yield routes, and improve network efficiency.

• The performance continued on a strong trajectory, bolstered by a robust load factor of approximately 90% throughout the year. Average fares increased by 7% YoY to reach RM231 even when there was a marginal dip of 4% Quarter-on-Quarter (“QoQ”) due to seasonal factors.

• Ancillary revenue grew to RM52 per passenger, a 4% YoY increase. This exceeded the target of RM50 per passenger and contributed to a total ancillary revenue of over RM824 million. 

• RASK increased by 10% YoY to USc4.79, driven by the 8% and 7% YoY increase in passengers carried and average fares coupled with the appreciation of MYR against USD.

• CASK ex-fuel rose slightly by 3% to USc3.16, primarily driven by user charges and other operating expenses associated with increased flight activities. While 10% lower fuel price per barrel and reduced maintenance costs contributed to cost savings, overall CASK declined by 1% YoY to USc4.98. Excluding non-flying aircraft costs, operational CASK and CASK ex-fuel would be lower by 4% and 2%, respectively. 

CEO of Aviation Group, Bo Lingam, comments on the business outlook:

“We are optimistic about the upcoming fourth quarter, which is traditionally a strong period for the aviation industry. We expect to maintain high load factors exceeding 85% and robust average fares driven by year-end festivities. To accelerate this momentum, we will expand our fleet by adding five new A321neo aircraft to our Malaysian and Thai operations, bringing our total active fleet to 205 aircraft. We will also launch 18 new domestic and international routes to cater to the growing demand from key markets like China and India. In 2025, while we are returning two aircraft to our lessors, we are also anticipating adding eleven new aircraft into our fleet, bringing the total fleet count to 233 aircraft.”

Highlights of 3Q2024 of the Capital A Companies

Overall, Capital A’s non-aviation companies delivered promising growth, generating over RM771 million in pre-elimination revenue for the quarter, up 19% YoY. Teleport and ADE were the key revenue contributors, accounting for 35% and 25%, respectively. The recorded EBITDA was RM90 million, or a 12% margin, which resulted in a quarterly net operating profit of over RM61 million.

ADE

ADE's revenue increased by 12% year-over-year (YoY) to RM184 million, resulting in an EBITDA of RM29.6 million, which represents a 16% margin. This growth was primarily driven by a 14% YoY rise in revenue from engineering maintenance services, supported by expanded capacity and geographic coverage. Additionally, the increase in maintenance activities led to higher revenue from component sales. However, ADE faced higher operating expenses due to an increased headcount needed to accommodate the expanded hangar capacity. AEROTRADE, the digital marketplace, experienced a remarkable 128% YoY and 53% quarter-over-quarter (QoQ) increase in the number of parts sold to third parties during the quarter.

CEO of ADE, Mahesh Kumar, comments on the business outlook:

“ADE is set to operationalise its remaining eight hangar lines at KLIA, bringing the total to 16 active lines by the year-end. The increase in base maintenance capacity gives ADE more opportunities to serve third-party customers while prioritising AirAsia’s fleet. We are proud to announce that in December, ADE will begin to perform base maintenance checks for widebody aircraft (“A330”), which is expected to boost the fourth quarter revenue significantly. Besides the hangar, ADE will launch a new workshop in Nilai in early 2025, with composite and component repair capabilities. We are also working on launching our aircraft engineering training centre to develop a skilled workforce that will support future growth. Even more exciting is the strategic investment with Garuda Maintenance Facility (GMF) to expand the landing gear overhaul facility. The partnership aims to tap into Southeast Asia's robust landing gear market and expects to start generating revenue by 4Q2025.”

CAPAS (consisting of Santan and DARTS)

CAPAS delivered a strong performance, generating revenue of RM105 million. The segment achieved an EBITDA of RM25.7 million, reflecting a 24% margin, and a net profit of RM11 million, corresponding to a 10% margin.

Santan experienced a significant revenue increase of 20% year-on-year, reaching RM50 million, with an EBITDA of RM4.8 million. This growth was primarily driven by inflight sales, which had a take-up rate of 28%, and inflight revenue per passenger reached USD 0.9. The introduction of combo meal options has been particularly well-received by passengers. In the ready-to-eat segment, Santan sold over 230,000 units in the third quarter, a substantial increase from just 700 units during the same period last year, thanks to expanded partnerships with leading retailers.

CEO of CAPAS, Subashini Silvadas, comments on the business outlook:

“CAPAS has many exciting projects in the pipeline. One important development is Santan pursuit of an inflight catering licence to expand its inflight customer base beyond AirAsia. By obtaining this licence, Santan will benefit from volume scale and better utilise its supply chain assets, which ultimately optimizes operations and drives revenue growth. 

“Another initiative is the planned acquisition of the Ground Team Red (“GTR”), our joint venture company that handles aviation ground handling, from the Aviation Group. GTR currently plays a vital role in ground handling operations, and expanding these services will enable us to offer a more comprehensive suite of aviation services. This move is part of our vision of becoming a fully integrated aviation service provider. Besides this, we are also looking to expand the scope of CAPAS, potentially looking to invest and operate an airport management company, which will complement our aviation services portfolio.” 

Teleport

Teleport's revenue increased by 52% year-over-year, reaching RM61.4 million (approximately USD 61.4 million). This growth was primarily driven by a 31% year-over-year increase in tonnage and a remarkable 113% growth in the number of delivery parcels moved. In this quarter alone, over 15.7 million parcels were delivered, contributing to a year-to-date total of over 47 million parcels, compared to 30 million parcels in the same period last year.

Additionally, Teleport reported a positive EBITDA of RM21.9 million (approximately USD 4.8 million) for the quarter, a significant increase from RM3.4 million in the third quarter of 2022 after accounting for IFRS 16 adjustments.

CEO of Teleport, Pete Chareonwongsak, comments on the business outlook:

“Our 3Q2024 results are evidenced by the acceleration in cargo and eCommerce parcel volumes that we have moved through The Teleport Network, delivering higher operating profit through increasing returns to scale. This growth was delivered on the back of four key strategies: First, we continue to deepen relationships with existing customers by delivering greater market reach and improved service reliability from China to regions like Asean, Oceania, and the Middle East; while at the same time, continuing to pursue more direct volumes from China’s top eCommerce marketplaces through value-added end-to-end services. Third, we continue to strengthen our operational capability and available capacity - with our freighter operations stabilised in early 3Q2024, combined with continuous efforts in growing The Teleport Network with more belly and freighter capacity on top of the 40 partner airlines, welcoming Terra Avia, a Boeing 747F operator, as one of our latest Air Partner to join The Teleport Network; and lastly, consistently optimising our end-to-end costs, including our last mile operations, to maintain our asset-light, low-cost structure model. We are confident we will close 2024 on a high note, with an expected 50% YoY growth at approximately RM1 billion in total revenues — our strongest performance since inception seven years ago.”

MOVE

AirAsia MOVE reported revenue of RM128 million, reflecting a 25% year-over-year decline, primarily due to decreased sales of AirAsia flight tickets. As the Aviation Group works to recover from the financial impacts of the pandemic, it has engaged in preferential deals, including selling inventories to other online travel agents. This strategy will conclude by this December. 

Despite declining flight ticket sales, other key segments of AirAsia MOVE are showing strong growth. Hotel revenue increased by 6% year-over-year, driven by a 35% booking surge, supported by better deals and personalized offers tailored to our user demographics. Additionally, the Rewards segment achieved a remarkable 29% revenue growth year-over-year, fueled by higher gross billing, increased points issuance, and improved redemption rates.

On a positive note, AirAsia MOVE's EBITDA significantly strengthened, rising by 65% year-over-year to RM19 million, thanks to effective cost optimization initiatives and improvements in returns across core businesses.

CEO of AirAsia MOVE, Nadia Omer, comments on the business outlook:

“As the cornerstone of AirAsia's sales channel, we are doubling down on our popular regional campaigns to drive demand. Right now, we only contribute 40% of the total share of AirAsia’s bookings, and we aim to improve this to 60% by mid-2025 through multiple strategic initiatives already underway. Meanwhile, we will continue to boost non-AirAsia booking volume through strategic partnerships and destination marketing with airline partners and tourism board partnerships. We will also improve our conversion rate of 0.75% further by refining pricing strategies and leveraging AI-driven personalisation to enhance the user experience and streamline the booking process. Our hotels and SNAP segments have seen good conversion traction at 4.2% based on strong content, pricing, and personalisation. From here on, we plan to grow bookings by increasing investments in awareness and driving more traffic. For Rides, we focus on strengthening our position as the go-to airport ride provider, aiming to reach an 80% completion rate by Q4. Finally, our Rewards program will continue to expand its partner network, offering our loyal customers a wider range of exclusive benefits and incentives.”

BigPay's revenue reached RM8.7 million, and its EBITDA loss decreased by 2% year-over-year to RM21.7 million. This improvement was primarily driven by cost-cutting initiatives, including a 26% year-over-year reduction in staff costs. A fraud incident was identified during this quarter, but provisions were made to mitigate its impact. We have engaged legal counsel and are confident that a significant portion of the funds will be recovered through the legal process.

Additionally, the annualized ARPU (Average Revenue Per User) grew by 8% yearly, and revenue per headcount in 3Q2024 increased by 5% year over year. To support further growth, BigPay will intensify its integration with AirAsia MOVE and enhance spending within the AirAsia ecosystem. The recent launch of BigPay Lite resulted in 44% of new users in 3Q2024 being onboarded through this channel. 

BigPay will focus on foreign workers for remittance services, starting with Indonesians working in Malaysia. The company is also finalizing a credit line with a bank, strengthening its lending services and accelerating its journey toward sustainable profitability.

AirAsia brand Co. (Abc.) and other subsidiaries

Abc. and other subsidiaries recorded quarterly revenue of RM57.4 million, reflecting a nearly 11x YoY increase. The company maintained a strong EBITDA of RM15.2 million, a robust 27% margin. Abc. continues to promote the master brand AirAsia through strategic partnerships, including collaboration with SEGA to boost inflight experiences and Asean sports sponsorship for regional brand promotions and visibility. The company has also developed the 'AirAsia Buds' character IP that presents exciting opportunities for future merchandise and licensing revenue. 

CEO of Capital A, Tan Sri Tony Fernandes’ comments on the business outlook:

“We are thrilled to announce a significant milestone in our journey to emerge from PN17 status. Having secured the shareholder approval for the disposal of our aviation business, we are on track to complete this transaction by January 2025. Concurrently, we are actively working on submitting and securing approval for our regularisation plan, which has been simplified.

Looking ahead, we anticipate a strong fourth quarter. Our aviation business will be driven by peak travel season and increased capacity. ADE will capture growing MRO demand through the expanded hangar capacity, while Santan's entry into the third-party airline catering market will further boost our revenue. Teleport's robust performance, driven by increased volume and operational efficiencies, is expected to increase. The successful resolution of freighter capacity issues and expanding our network will further strengthen our position in the logistics market.

AirAsia MOVE will remain our primary platform for flight sales while expanding its offerings to include non-AirAsia flights through strategic partnerships and leveraging cross-selling opportunities. Our brand company is gearing up for a strong 2025, focusing on strategic partnerships and innovative initiatives to elevate the brand's global presence."