● AirAsia’s (AA’s) 1Q FY09 net profit of RM203 mn was in line with our forecast, but exceeded consensus expectations, coming in at 77% of street’s full-year forecast.
● Net profit growth of 26% YoY was driven primarily by higher revenue (+34% YoY) and lower fuel costs, despite taking a RM42 mn charge for forex losses (net of aircraft sale).
● Management will focus on loads; we thus expect average fares to fall. However, we have already factored in a 10% decline in average fares.
● We have cut our FY09 forecast by 5% to reflect the RM42 mn exceptional charge.
● AirAsia is expected to continue on its strong growth trajectory, with a 16% traffic CAGR over the next three years. We thus maintain our OUTPERFORM rating.
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