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AirAsia Investor DayKuala Lumpur, 11 January 2007AirAsia Investor DayKuala Lumpur, 11 January 2007
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Opening Speech
Mohshin Aziz Investor RelationsPhone: +603 8660 4013 (office)+6012 318 2854 (mobile)
Email: [email protected]
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AGENDA
10:00 Opening Speech by Tony Fernandes, Group CEO11:30 Formal Presentations
- Tassapon Bijleveld, Thai AirAsia CEO- Rozman Omar, Group Chief Financial Officer - Kathleen Tan, EVP Commercial- Seamus Moriarty, Route Revenue Director - Yap Mun Ching, Route Planning Manager
1:20 LUNCH
2:30 Formal Presentations- Azhari Dahlan, Regional Director Engineering- Kamarudin Meranun, Deputy Group Chief Executive Officer - Joyce Lai, Regional Director, Academy
3:30 Tour of Facilities
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IntroductionTony Fernandes Group CEO
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The Successful LCC SouthWest & Ryanair
RYANAIR
0
10
20
30
40
1998 1999 2000 2001 2002 2003 2004 2005 2006
million pax
0
30
60
90
120# aircraft
Pax (mill) Aircraft
Started 1985
Started 1971
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Continuous Growth & Value Creation
Ryanair in 2001 Ryanair in 2006
Continuous Network Expansion Steady Market Capitalization
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Snapshot of AirAsia
0
3
6
9
12
15
Jun-2002 Jun-2003 Jun-2004 Jun-2005 Jun-2006
million pax
0
10
20
30
40
50
# aircraft
Pax Aircraft
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Key Ingredients of a Successful LCC
LOWEST unit cost in the World
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Key Ingredients of a Successful LCC
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Key Ingredients of a Successful LCC
q One stop training centre
q Consistent supply of pilots
q Engineering traineeq High quality manpower
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Key Ingredients of a Successful LCC
Asias Top Airline Brand(Kathleen Tan)
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Key Ingredients of a Successful LCC
q 15% unit cost improvement
q More profit per aircraft
q Better Reliabilityq Unrivaled comfort
q Popular among guest
q Elevated brand status
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Key Ingredients of a Successful LCC
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Efficient Distribution drives Cost Savings
q Growth of internet bookings ease of use; in 9 languages driving distribution cost down
q Mobile phones first airline to offer comprehensive
booking system via wireless devices
q Call Centers centralized with multi lingual
q Call Centers target high foot traffic locations
Caters from the most basic tothe most sophisticated users
6
29%
43%
47%
60%
70%
0%
25%
50%
75%
2003 2004 2005 2006 2007F
AirAsia Internet BookingsAirAsia Internet Bookings
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Key Ingredients of a Successful LCC
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Most Geographically Connected RouteNetwork System in Asia
Existing bases
Potential New base
Penang / Alor Star
- 6 bases
O 71 routesQ 50 aircraft
Q 26 Routes
Kuching
Q 26 Routes
Kuching
Q 27 Routes
Kota Kinabalu
Q 27 Routes
Kota Kinabalu
Q 28 Routes
Johor Bahru
Q 28 Routes
Johor Bahru
Q 69 Routes
Jakarta
Q 69 Routes
Jakarta
Q 1219 Routes
Bangkok
Q 1219 Routes
Bangkok
Q 2633 Routes
Kuala Lumpur
Q 2633 Routes
Kuala Lumpur
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Dominating ASEAN with Highest MarketShare & Flight Frequency
1Kuala Lumpur Medan
1Kuala Lumpur Jakarta
1
1
11
Rank
Kuala Lumpur Kota Kinabalu
Kuala Lumpur Bangkok
Kuala Lumpur Bali
Kuala Lumpur Kuching
Route
2Kuala Lumpur Medan
5Kuala Lumpur Jakarta
2
6
8
8
Flights / day
Kuala Lumpur Kota Kinabalu
Kuala Lumpur Bangkok
Kuala Lumpur Bali
Kuala Lumpur Kuching
Route Frequencies
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Key Ingredients of a Successful LCC
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Impact of Domestic Rationalization
12 %
2 0 %
2 5 % 2 7 %
4 8 %
2002 2003 2004 2005 NOW
AirAsia Passenger Market Share in Domestic MalaysiaAirAsia Passenger Market Share in Domestic Malaysia
q Domestic rationalization enables us to capture significant market share
q AirAsia is now Malaysias largest domestic airline,,,, and growing!
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Key Ingredients of a Successful LCC
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Airport Support
q Airports co-promote efforts to boost arrivals Macau Clark Airfield
q Low Cost Terminal to drive cost lower Kuala Lumpur Low Cost Carrier Terminal Kota Kinabalu Low Cost Carrier Terminal
q Airport support remains a challenge more is required Airport should lower charges to boost volumes Restricted access (KL to Singapore, KL to Ho Chi Minh)
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LCCT Master Plan
q Enhance Service Level food court more retail space component bus terminal rail link to Kuala Lumpur
Will be the premier Low Cost Hub for Region
q MAB to expand LCCT
cater 15 million pax; double floor space more facilities (food court, retail component) aircraft parking apron will be able to cater
for widebody aircraft @ AirAsia X covered walkways multi level carpark
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Key Ingredients of a Successful LCC
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Key Ingredients of a Successful LCC
Consistent cash growth(Rozman)
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Key Ingredients of a Successful LCC
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Significant Growth Potential
Thailand
South Korea
Singapore
Philippines
Pakistan
New
Zealand
Malaysia
Indonesia
India
China
Brunei
Australia
0.01
0.10
1.00
10.00
$- $10,000 $20,000 $30,000
GDP per capita (2002, in US$)
A i r
r o u n
d t r
i p s p e r c a p
i t a
( 2 0 0 2 )
LCC Penetration by RegionLCC Penetration by Region Income and Air TravelIncome and Air Travel
Source: IATA and US Department of Transportation Source: S-A-P
AirAsia is targetingAirAsia is targetingthe highest growththe highest growth
marketsmarkets
The average MalaysianThe average Malaysiancurrently flies only oncecurrently flies only once
every 2 yearsevery 2 years
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
1990 1992 1994 1996 1998 2000 20 02 2004EUSA Europe Asia Pacific
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New Bases to Capture more Growth
PHUKET
Planned New Base
Existing Base
PENANG
SURABAYABALI
CHIANG MAI
MEDAN
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The Future Asia Map will be Written in RED!
Existing Destinations
Potential Destinations
x
x
x
x
x
x
x x xx
xx
x
x xx
x xxxxx
xx
x
xx
xx
xxx
x
x
xx
x
xx x
x
xx
x
x
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Foundation Laid for a StrongGrowth Story
Foundation Laid for a Strong
Growth Story
f
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Exercises 30 Options, Increase 20 firmorders and Acquired 50 Options
q 50 aircraft delivered over a period of four years September 2009 till September 2013
q Increases passenger growth projection FY2010 to 15% FY2011 to 25% FY2012 to 25% FY2012 to 25%
q Possibility of selling seven owned Boeing 737-300
q Maintain youngest fleet for Asian airlines
q Aids cost reduction efforts for future years
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Summary Airbus A320 Purchase Agreement
Current position50150Total Purchase
Agreement
Convert options to firm order
New firm order for 20 Aircraft
New options for 50 Aircraft
(30)
50
30
20
Supplemental
(10 January 2007)
Convert options to firm order
New options for 30 Aircraft
(40)
30
40 Additional
(31 August 2006)
Original Purchase Agreement4060Original
(11 March 2005)
NoteNo. of Purchase
Options(cumulative)
No. of Firm
Orders
Purchase
Agreement
AirAsia is the largest customer for Airbus A320 in Asia Pacific
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Airbus A320 Delivery Schedule
7
14
23
16 1518
7
4
8
17
18
30
5
10
15
20
25
30
FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014
# of AircraftSupplemental
Additional
Original
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Boeing 737-300 Retirement Schedule
0
1
2
3
4
5
6
7
8
2007F 2008F 2009F 2010F 2011F 2012F 2013F 2014F
# Aircraft Retired
Fl t G th Pl t 2013 ft tti g
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Fleet Growth Plan to 2013 after nettingoff retirement of Boeing 737-300
54
72
82
99
125
142
159
0
20
40
60
80
100
120
140
160
180
FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013
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Passenger Projection to 2013
915
21
27
31
39
47
54
0
10
20
30
40
50
60
FY2006(Actual)
FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013
Passengers(million)
60%
40%
25%15%
25%
25%
15%
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58
50
34
23 2218 17 15 15 1515
0
20
40
60
JAL ANA Qantas EVA Korean Air
Thai SIA AirAsia(FY07F)
MAS Cathay Emirates
Asias Largest AirlinesPax per year (million)
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5850
15
34
23 2218 17
6
7
39
12
17
46 10
0
20
40
60
80
JAL ANA AirAsia Qantas EVA Korean Air Thai SIA
2013Current
AirAsia in 2013 (Projection)Pax per year (million)
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78
35 33
17 15 1513 9 9
0
20
40
60
80
SouthWest Ryanair EasyJet AirTran AirAsia(FY2007F)
JetBlue GOL WestJet Virgin
AirAsia against other LCCPax per year (million)
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Cost ManagementCost Management
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Managing the Fuel Price
q Partial hedge in 2007 80% volume cover for 3Q-FY2007 55% volume cover for 4Q-FY2007 50% volume cover for 1Q-FY2008 protection against price movement higher than US$62.25/bbl for Crude
WTI component at current price levels, we will be taking additional hedges
q Fuel surcharge yielding $32 / bbl recovery
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Riding the Strong Malaysian Ringgitq Significant operational cost are USD$ linked
0.7373%Total
0.430.190.050.050.01
43%19%5%5%1%
Fuel Aircraft cost (lease, D&A)Interest on loansMaintenance & OverhaulUser station (some are USD)
* Impact on NetMargins %
% RevenueUSD$ Cost Base
1% move of MYR:USD = 0.73% Net Income Margin
* assuming revenue stream remains equal
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Managing Forex Expense
q Partial Hedge on USD exposure
q USD$ Liabilities turned into Ringgit using par forward swap
q Cost Savings on 10 first aircraft (six aircraft ECA backed and four commercial term loans) Cost Savings of RM156 million from initial budget for entire
financing term period
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Cost Management
2.632.83
3 .40
2 .90
2 .47
2.192 .33
2 .202 .35
1.96
1.72
1.111.32
1.17
2002 2003 2004 2005 2006 Q1-2007
Cost / ASK (ex fuel surcharge) Cost / ASK Non Fuel Cost
Cost / ASK (US cents)Cost / ASK (US cents)
Malaysian Operations
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Quantification of Cost Savings
1. If fuel price goes down by USD$ 5/barrel Cost Savings of 0.10 US cents / ASK(base of assumption for FY2007 Budget USD$ 75/barrel)
2. If Malaysia Ringgit appreciates by 0.10 RM vs. USD$
Cost Savings of 0.04 US cents / ASK(base of assumption for FY2007 Budget 3.71 RM:USD)
3. If Malaysia Ringgit appreciates by 0.10 RM vs. USD$ Interest Payment Savings of RM 120,000 per aircraft per year
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Ancillary IncomeAncillary Income
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Ancillary Income Comparison
Plenty room for improvement targeting USD$6/pax for the future
Ancillary Income USD$ / pax % Revenue
Ryanair 10.9 15.6% WestJet 16.0 13.1% AirAsia 4.3 12.5% EasyJet 5.5 6.5% JetBlue 5.5 4.8%
VirginBlue5.1 5.4%
GOL 4.2 4.9% SouthWest 3.5 4.0% AirTran 3.2 3.7% Average 6.4 7.8%
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Go-Holiday
The One Stop Online Travel Portal in the Region
-
10,000
20,000
30,00040,000
50,000
60,000
70,000
80,000
200 4 2005 200 6 1H-2007
Rooms Sold
More and more people booking their hotels on-line
G H lid
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Go-Holiday
q Expanding the Hotel list recruiting more hotel partners to cater future needs partnership with reputable hotel group (Accor and Intercontinental) maintain a strong reputation of value for money
q Increasing the value chain from our partners
aggressive negotiation and profit sharing agreement formulate attractive packages (medical, golf, family fun, etc) formulate packages to make people stay longer
Average length of nigts booked
2004 2005 2006 1H-2007
# days booked 2.96 3.33 3.34 3.36
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T l I @ G I
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Travel Insurance @ Go-InsureTotal Monthly Policy Count
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06
Policy Count
L P d
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Latest Products
1. In-Flight magazines advertising space to generate revenue
2. On-line games some games are already available on website now
3. Gift cards
4. In-Flight Radio (evaluating)
Endless Possibilities to Generate Revenue
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Endless Possibilities to Generate Revenue
Empty space for hire
Banner generates revenue
Th M t St li h Ai ft i T
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The Most Stylish Aircraft in Town
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New Business DevelopmentsNew Business Developments
Strategic Link up with FAX
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Strategic Link-up with FAX
q Brand name agreement FAX will use AirAsia X brand name (royalty payments)
q AirAsia signs MOU to look into taking a stake in FAX 20% exposure into FAX at par value via direct equity or debt
instrument in the interim options for an additional 10% for a period of 5 years FAX and AirAsia will never compete on each others route
Why Long Haul Budget Travel?
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Why Long-Haul Budget Travel?
q Budget travel is perfect for Malaysia budget market is underserved (most airlines focused on premium travel) Malaysia is surrounded by premium hubs (Singapore & Bangkok) gateway for the region (lowest cost, geographical, political stability) Malaysia has liberal relationship with most counties in the World
(no strict visa requirements, transparent application process)
q How is FAX link up beneficial to AirAsia? expand client base to long-haul connectivity enhance route network leverage brand name with other airlines in the world
(Virgin, EasyJet, Air China, Air Arabia)
Proposed Route Map
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Stansted PragueMoscow
Cairo
Seoul
Pusan
CheongjuSapporo
OsakaFukuoka
Dalian
Jeddah
Sharjah
BangaloreGoa
Mumbai Hyderabad
New DelhiKarachiLahore
Brisbane
Melbourne
AdelaidePerth
KUALALUMPUR
ShenyangTianjin
Hangzhou
Xiamen
Targeted July 2007 Rollout
Targeted Future Destinations
Berlin
United Kingdom
Avalon
Proposed Route Map
Machester
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Possible tie-up in the future
Potential Business Development: CARGO
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Potential Business Development: CARGO
q Current Status outsource to third party adhoc basis, reliant on the third party current load 108,000 tons / year @ 8% capacity utilization
q Proposed Cargo Operations
manage all aspects of cargo operations ourselves(system, marketing, warehousing, aircraft handling, distribution)
use AirAsia flights as belly network comprehensive chain (retailers, agents & wholesalers) door to door service (in consideration)
Targeted launch date = within 3 months
Business Plan: AirAsia CARGO
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Business Plan: AirAsia CARGO
q Low Cost Solution yield management (early = cheaper, late = market rates) retain existing business while opening up a new segment
q Comprehensive Distribution System synergies with AirAsias existing platform
online booking and tracking system call centre
q Team up with other airlines to enhance network interline with other airlines, road feeder services, couriers, etc long haul cargo can make use of AirAsia dense geographical
coverage of ASEAN countries
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Other Potential Business Developments
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p
1. AirAsia Academy setting up a flight school partnering with CAE (to be discussed in AirAsia-Academy presentation)
2. Possible new Joint-Ventures
Philippines, Bangladesh, Sri Lanka consultancy services to other airlines
