1.

Introduction

AirAsia is one of the award winning and largest low fare airlines in the Asia
expanding rapidly since 2001. In 2011, AirAsia build 14 hubs in four countries in the
region Malaysia, Thailand, Indonesia and Philippines; they fly 154 routes and serve 80
destination including AirAsia X. AirAsia believe that no frills, hassle free, low fare
business concept and keeping costs low requires high efficiency in every part of
business. Through their promise of Now Everyone Can Fly, AirAsia has sparked a
revolution in air travel with more and more people around the region choosing AirAsia as
their preferred choice of transport (AirAsia, 2011).
2.0

Financial Analysis
2.1

Revenue Trend Analysis

In AirAsia, the main source of revenue is passenger seat sales which affected by
passenger carried. There is an increase in passenger carried at 12.64% and lead to
passenger seat sales rise at 32.41% over the period from 2009 to 2010, which is major
contribute to increases of revenue at 26%.
From 2010 to 2011, revenue increase at 13.86%. As compared to previous
report, passenger seat sales increase at 8% which resulting from an increase in
passenger carried at 12.03%.
The passenger carried is increasing in decreasing rate due to the financial crisis
of 20072008. Most of the people around the world are affected by the financial crisis
and the crises indirectly reduce the number of people who want to travel. However, we
can see that AirAsia is in the recovery period from the financial analysis (Shinki 2012).

2.2

Ratio Analysis: Current Ratio

Current Assets
Current Liabilities

Current ratio measures the ability of the company to meet their short term debt by
current assets. AirAsia has a strong current ratio of 1.73:1 in 2011; it is increasing over
the period from 1.30:1 in 2009, which indicate the balance sheet of AirAisa is getting
better and stronger. The rising trend is probably due to increase in current assets. Major
contributed to the increase of current assets is deposit, cash and bank balances.
Deposit, cash and bank balances have double up to RM1505mil from 2009 to 2010; and
increase at 40% to RM2105mil from 2010 to 2011.
2.3

Ratio Analysis: Return on Capital Employee

EBIT

Total Liabilitis - Deposit, Cash and Bank Balance + Equity

From the analysis, it shows that AirAsia is more and more efficient in using its
capital employed to generate profit, which the ratio is increasing from 9.63% to 11.97%
1

over the period from 2009 to 2011. This is due to the profitable core airline service
operation and efficiency of control in operating expenses which result the rise of
earnings before interest and tax (EBIT) from 17% to RM1067mil at 2010 and 9% to
RM1163mil at 2011, and the operating cost increase from 30% to RM2881mil at 2010
and 16% to RM3332mil at 2011(AirAisa, 2010; AirAisia, 2011). Although there is an
sharp increase in aircraft fuel expenses at 30% to RM1210mil at 2010 and at 45% to
RM1760mil at 2011, but the favorable efficiency control in operating expenses had
helped maintain a steady growth and high level of ROCE (AirAisa, 2010; AirAisia, 2011).

EBIT

Interent Expenses

2.4

Ratio Analysis: Interest Cover

There is an increase of 0.33 times over the period from 2009 to 2010, which
interest is covered by 2.46 times by the profit in 2009 and 2.79 times in 2010. This is
due to the proportional of increase in profit before interest and tax is more than the
increase in interest expense, 17% and 3%; and this indicate that AirAsia has enough
profit to cover the interest expense incurred in both years.
The ratio continues increase to 3.09 times from 2.79 times previously. As
compared to previous report, same reason is occurs over the period from 2010 to 2011
with the proportional of 9% and -1.54%; and this indicate that the increase of ratio is
mainly due to a reduction in interest expense in 2011. From the AirAsias annual report
2011, the reduction in interest expense is due to reduce of borrowings of term loans and
Commodity Murabaha Finance.

Revenue

Capital Employed

2.5

Ratio Analysis: Asset Turnover Ratio

From the analysis, the ratio increases constantly at 0.03 times over the period
from 2009 to 2011, which indicate AirAsia more and more efficient in utilize its assets to
generate revenue. The factors that affect the increase of ratio are the revenue and
aircraft utilization. An airline makes money when the aircraft is flying; therefore, the
aircraft utilization is significant to the ratio. From 2009 to 2010, the increase ratio is
resulting from the increase in revenue at 26% and utilization of aircraft (12 hours per day
to 12.2 hours per day). As compared to previous report, the rise of ratio also resulting
from the incline in revenue at 14% and utilization of aircraft which increase from 12.2
hours per day to 12.3 hours per day over the period from 2010 to 2011.
3.0

Conclusion

In overall, AirAsias performance is getting better and stronger compare with 2009
to 2011. AirAsia is more liquid than previous years, which indicate AirAsia has more
capital to invest more projects in order to attract more and more investor and profit. The
return of capital employed is increasing over the period from 2009 to 2011, this is a good
2

sign which indicate AirAsia management efficient utilize their capital employed to
generate more profit.

4.0

Recommendation

In my opinion, to attract more customers to use AirAsia service, they need to

increase the loyalty of customer to AirAsia service. To increase customer loyalty,
improve quality of service is very important to AirAsia
Improve punctuality of aircraft will increase a lot of customer loyalty due to
traveller can plan their trip more precise and can avoid wasting time in order to travel
more.
Due to the recently aircraft tragedy- MH370 and MH17, traveller is losing
confidence on the security. Therefore, AirAsia should emphasis on more effective safety
and security to avoid accidents. For example, more stringent on crew training and
mentally control of crew to avoid human error which can cause the aircraft accidents.

5.0

Appendix

Revenue Trend Calculation

2009 2010 (RM000)
3,948,095 3,132,901

100%
3,132,901
= 26.02%

2010 2011 (RM000)

4,495,141 3,948,095

100%
3,948,095
=13.86%

Passenger Carried Trend Calculation

2009 2010 (RM000)
16,054,738 14,253,244

100%
14,253,244
= 12.64%

2010 2011 (RM000)

17,986,558 16,054,738

100%
16,054,738
=12.03%

Passenger Seat Sales Trend Calculation

2009 2010 (RM000)
2,830,920 2,138,011

100%
2,138,011
= 32.41%

2010 2011 (RM000)

3,056,082 2,830,920

100%
2,830,920
=8%

Current Ratio Calculation

3

2009 (RM000)
2,220,972

1,709,688
1.30 : 1

2010 (RM000)
2,874,164

1,843,591
1.56 : 1

2011 (RM000)
3,793,948

2,194,072
1.73 : 1

Deposit, Cash and Bank Balances Trend Calculation

2009 2010 (RM000)
1,504,617 746,312

100%
746,312
= 101.6%

2010 2011 (RM000)

2,105,010 1,504,617

100%
1,504,617
=39.9%

Return on Capital Employee Calculation

2009 (RM000,000)
913

X100%
6862 2621
9.63%

2010 (RM000,000)
1067

X100%
6352 3641
10.68%

2011 (RM000,000)
1163

X100%
5676 4036
11.97%

Profit before Interest and Tax Trend Calculation

2009 2010 (RM000)
1,066,961 912,754

100%
912,754
= 16.89%

2010 2011 (RM000)

1,162,520 1,066,961

100%
1,066,961
=8.96%

Operating Cost Trend Calculation

2009 2010 (RM000,000)
2,881 2,220

100%
2,220
=29.78%

2010 2011 (RM000,000)

3,332 2,881

100%
2,881
=15.65%

Aircraft Fuel Expense Trend Calculation

2009 2010 (RM000)
1,210,108 927,795

100%
927,795
= 30%

2010 2011 (RM000)

1,759,868 1,210,108

100%
1,210,108
=45%

Interest Cover Calculation

4

2009 (RM000)
912,754

371,153
2.46 times

2010 (RM000)
1,067,961

382124
2.79 times

2011 (RM000)
1,162,520

376257
3.09 times

Interest Expense Trend Calculation

2009 2010 (RM000)
382,124 371,153

100%
371,153
=2.96%

2010 2011 (RM000)

376,257 382,124

100%
382,124
=(1.54%)

Asset Turnover Ratio Calculation

2009 (RM000)
3,132,901

9,668,732
0.32 : 1

2010 (RM000)
3,948,095

11,396,709
0.35 : 1

2011 (RM000)
4,495,141

11,711,637
0.38 : 1

** (Amount is taken from AirAsia Financial Report 2010 and 2011)

6.0

Reference

Frank,W. Alan,S. (2012). Business Accounting 1 (12 th edition). Pearson Education Ltd.
AirAsia. AirAsia Official Website. Available at: http://www.airasia.com/my/en/about-us/irwhat-is-lcc.page (Accessed: 23 JULY 2014)
SHINKI (2012). Low Cosy Airline in Crisis Time- AirAsia. Available at:
http://imoneyface.blogspot.com/2012/02/low-cost-airline-in-crisis-time-air.html
(Accessed: 23 JULY 2014)
Harold, A. What is Trend Analysis. Available at:
http://www.accountingcoach.com/blog/trend-analysis (Accessed: 23 JULY 2014)
My Accounting Course. Financial Ratio Analysis, Available at:
http://www.myaccountingcourse.com/financial-ratios/ (Accessed: 23 JULY 2014)

Maybank (2010). Maybank IB Research- AirAsia. Available at: http://research.maybankib.com/pdf/document/AirAsia_2010_08_17_MIB_122.pdf (Accessed: 23 JULY 2014)
Planespotter. AirAsia Fleet Details and History. Available at:
http://www.planespotters.net/Airline/AirAsia (Accessed: 23 JULY 2014)
AirAsia. What is Low Cost. Available at: http://www.airasia.com/my/en/about-us/ir-whatis-lcc.page (Accessed: 23 JULY 2014)
AirAsia (2010, 2011). AirAsia Financial Report 2010 and 2011. Available at:
http://www.bursamalaysia.com/market/listed-companies/company-announcements/#/?
category=AR&company=5099 (Accessed: 23 JULY 2014)