Asia Aviation Plc (AAV) posted a 43% drop in first-quarter net profit, rocked by dearer global oil prices and a hefty rise in excise tax on jet fuel.
The SET-listed majority shareholder of Thai AirAsia (TAA), Thailand's largest low-cost carrier, made 570 million baht in net profit from January to March, down from 1 billion posted in the same period last year.
Rising world oil prices and the Jan 25 rise in the country's excise tax on jet fuel from 20 satang a litre to 4.89 baht have dampened first-quarter profitability both for AAV and TAA.
World oil prices were 30% higher in the first quarter year-on-year, and are expected to rise gradually over the next 2-3 years to around US$60 a barrel over the coming years, according to the International Air Transport Association (IATA).
Analysts said the oil price factor is expected to affect the first-quarter financial results of other SET-listed Thai airlines including Bangkok Airways and Nok Air when they release their filings in the next several days.
AAV's net profit margin in the first quarter was at 6% while that of TAA was better at 11%. Its revenue for the period rose 2% to 9.15 billion baht, equal to that of TAA, in which AAV owns 55%, AAV said in its filing yesterday.
Its revenue increase was driven by 11% growth in passenger volume, carrying 4.9 million for the period, with a load factor of 89%, up 1 percentage point compared with the same period last year.
But revenue from charter flights amounted to 395 million baht, a 24% drop over the same period last year, due to a fall in the number of charter flights to the Chinese market.
This resulted in a decline in average fares by 9% to 1,569 baht per passenger, compared with 1,722 in the same period last year.
But average overall fares in this quarter rebounded by 11% to 1,415 baht per passenger, thanks to the revival of Thai tourism following the government's clampdown on illegal Chinese tour scams and the national mourning period in the last quarter of 2016.
AAV and TAA expect global oil prices to continue to rise for the rest of the year, and will therefore resort to a fuel hedging policy as a tool to mitigate its exposure to jet fuel price volatility, which is a major operating cost for airlines.
Tassapon Bijleveld, chief executive of AAV and TAA, said TAA has geared up its existing plans with an emphasis on strengthening its "interregional connections" within Thailand, which have experienced rapid growth.
TAA launched two new routes during the quarter, including daily flights from its U-tapao hub to Ubon Ratchathani and Phuket, which were well received. The airline also boosted its Don Mueang-Mandalay (Myanmar) route to two flights a day.
Moreover, on April 21, TAA became the first Thai-registered budget airline to have its air operator's certificate recertified by the Civil Aviation Authority of Thailand.
For the second quarter, Mr Tassapon said TAA is prepared to add a new route to Vietnam, with plans to launch a daily flight to Danang on June 9.
TAA is on target to bring its fleet to 57 aircraft, serving 19.5 million passengers and maintaining an average load factor of 84% for the entirety of 2017.
Meanwhile, flag carrier Thai Airways International on Monday became the first Thai-registered airline to receive both a new Air Operator Certificate and Dangerous Goods Certificate.