AirAsia Zest bullish on growth, looks to be profitable this year

LOW-COST carrier AirAsia Zest expects to turn in a profit within the year before the local unit of Asias biggest
budget carrier AirAsia Berhad holds an initial public offering (IPO) that was pushed further to 2017.
Im proud to say that for first half, we have achieved our load factor targets, and revenue so far is really okay.
Insofar as from an operations level, the growth is of course an improvement, AirAsia Zest Chief Executive Officer
Joy D. Caneba said on the sidelines of The Futuristics Centers conference on tourism last Friday in Makati City,
although she declined to disclose figures.
What were trying to do now is actually float either by IPO or by bond issuance, and maybe the local stockholders
would also be interested to put additional capital, she added.
It could be that we would have a bond issuance prior to the IPO or just an IPO -- I still need to meet with the
stockholders and see, the official said.
Formerly known as ZestAir, the homegrown airline has been rebranded in 2013 as AirAsia Zest to reflect its
partnership with AirAsia, Inc.
AirAsias Philippine unit recorded a net loss of 25.7 million Malaysian ringgit in the quarter ended March 2015, its
Malaysian-based parent said in its May 28 disclosure to Bursa Malaysia.
Details of the fund-raising activities have yet to be firmed up, but AirAsias IPO is targeted to yield $200 million,
with a public float between 20%-30%, Ms. Caneba said.
All of the proceeds will be used for working capital and expansion of the budget carriers route network.
We have not yet hired an underwriter, thats why I moved it to 2017 because I havent actually gotten into the IPO
specifics, Ms. Caneba added.
Since assuming the CEO position in April last year, Ms. Caneba started to implement a turnaround plan, which
includes improving the balance sheet, removing past liabilities, and having a profit at the end of the year.
The growth drivers would be an increase in local travel among the Filipinos because of the low fares weve offered,
theres a lot of DoT (Department of Tourism) efforts to drive the market and increase tourist arrivals into the
Philippines, and the increase in purchasing power of the Filipinos is comparable to those in the neighboring
countries. The peso is also stable, she said.
During the conference, Ms. Caneba told the audience that in the Philippines, there are not enough airports that can
accommodate the airline, which only operates a fleet of A320s.
Asked if it plans to acquire smaller planes to adjust to the countrys infrastructure, she said: Business-wise, its
something that Im studying. But from an AirAsia group, we only operate a consistent fleet of A320s. Our business
is offering low fares so if we only have a unit with fewer seats, the price would increase.
If you notice, turboprop operators really charge higher fares so its not really within the business model of
AirAsia, Ms. Caneba added.
Last Thursday, the aviation safety regulator of the 28-member European Union bloc lifted a five-year ban against all
Philippine carriers, allowing them to fly into European airspace.
Asked if the airline will take advantage of this opportunity and offer flights to Europe, she said: Not in the
immediate future, but definitely its something that were on the lookout for.

Ms. Caneba noted that the lifting of the ban would likely increase tourist arrivals from Europe. -- D. J. Magturo.

Comment:

Airlines that is low-cost have advantages that are affordable prices, ability to purchase tickets online at any
time and in any place, high safety, additional bonuses that tells that if you book earlier you can purchase cheaper
flights and no delays. It affects the working capital by increasing the inventories and also increasing in cash that
Zest air can receive by the different transactions so the effects of it in the working capital increases because of
increasing in current assets.
This low-cost airline also has two other hubs namely, Cebu City's Mactan-Cebu International
Airportand Kalibo International Airport in Aklan. The airline prides itself in offering the cheapest flights to
destinations across Asia. AirAsia Zest, together with AirAsia, boasts of being one of the best budget airlines with
over 100 destinations over Asia and Australia. It won as the Worlds Best Low-Cost Airline for 8 years running from
Skytrax as well as the Worlds Leading Low-Cost Airline Website in 2015 from the World Travel Awards.

MANILA, Philippines Air passenger traffic rose to 21.73 million in the first half of 2014, attributed to the
continued increase in the number of foreign and domestic tourists, the Civil Aeronautics Board (CAB) reported.
Volume of airline passengers grew by 9.5% from January to June this year compared to 19.84 million in the same
period in 2013.
Domestic airline passengers surged 15.32% to 12.42 million in the first half of 2014 from 10.77 million in the same
period last year.
Foreign passengers inched up by 2.6% to 9.31 million from 9.07 million, CAB reported.
Air traffic in the Philippines has been recovering from flat growth last year amid the reforms being implemented by
the Aquino administration, CAB executive director Carmelo Arcilla said.
Air traffic in the country has been growing by double-digit levels since 2005, except for 2013, Arcilla said.
We are reaping the benefits of the deregulated policy adopted by the Aquino administration, Arcilla said.
Budget airline Cebu Air Inc (Cebu Pacific) of taipan John Gokongwei dominated the domestic market after flying
5.82 million passengers in the first half of the year.

Philippine Airlines (PAL) Express came second with 2.77 million, national flag carrier Philippine Airlines Inc with
1.98 million, AirAsia Zest with 1.06 million, and Tiger Airways Philippines with 575,093.
PAL, which used to be jointly owned by tycoon Lucio Tan and diversified conglomerate San Miguel Corporation
(SMC), dominated the international market after flying 2.5 million passengers from January to June this year.
Cebu Pacific came second with 1.62 million, followed by AirAsia Zest with 377,198, Tigerair Philippines with
104,467, and PAL Express with 77,309.
Agreements, projects to boost air traffic growth
Arcilla said there is further room for growth of the countrys air traffic as the Aquino administration is pushing
several projects, including the proposed P2.4 billion ($53.92 million*) parallel runway to help decongest the Ninoy
Aquino International Airport (NAIA).
Arcilla added that the proposed runway optimization program could raise the capacity of the countrys main gateway
to 50 to 60 events per hour from the current 40 to 42 landings and take-offs per hour.
Likewise, the CAB official said several airports are being expanded and developed in the provinces including
theP17.5-billion ($393.17 million) Mactan-Cebu international airport being undertaken by the tandem of Megawide
Construction and Bangalore-based GMR Group, and the expansion of the Clark International Airport in Pampanga.
There are foreign airlines waiting in the wings, Arcilla said.
Arcilla also said that the air agreementssigned by the Philippines over the past few years led to more tourist arrivals.
CAB hopes to conclude agreements with 3 more countries, including Australia, this year.
So far this year, the Philippines concluded air talks with France, Singapore, New Zealand, Myanmar, Canada,
Macau,and South Africa. Air talks with Malaysia were called off twice.
Last year, the Philippines signed air agreements with Japan, Macau, Brazil, Australia, Israel, and Italy.
The Aquino administration is pursuing air talks as part of its open skies policy. Under Executive Order No. 29,
airports other than NAIA would be opened to more foreign traffic, in line with the target to lure 10 million tourists
by 2016.

Comment:
The increase of the number of passengers are due to increase in the level of air travel demand for the purpose of
Visiting Friends and Relatives (VFR), boosted by job mobility and migration flows, increase in the level of air travel
demand from retired people, Increase in the demand for customized travel and use of travel as a way to escape from
the stress of modern living will. It affects the working capital by increasing the current assets by the cash that the
zest air will receive also their plan in expanding and developing in the provinces also affects the working capital
because the current liability will be increase because of the materials that they need to purchase for the specific
equipment that they will use in their operations.