SEPANG: Malaysia Airports Holdings Bhd (MAHB) has reported improvement in earnings for its FY11 ended Dec 31, but sees a challenging year ahead.

The airport operator reported an increase of 0.3% in net profit for 4QFY11 to RM122.9 million from RM122.5 million previously due to stronger results from the airport operation segment, driven by robust air travel demand in 2011.

Revenue for the quarter rose by 2% to RM837.4 million, compared with RM820.6 million in the previous corresponding quarter, while profit before tax (PBT) and zakat fell 11.3% to RM161.9 million from RM182.6 million.

According to its chief financial officer Faizal Mansor, total passenger movement at MAHB’s airports in Malaysia increased by 10.7% to 64 million passengers in 2011 from 57.8 million passengers in 2010 on strong demand for air travel in Southeast Asia and Asia-Pacific. This is despite the debt crisis and the prospect of another recession in Europe reducing the appetite for air travel from the continent.

Other than the 39 airports in Malaysia under its management, MAHB also has strategic stakes in Sabiha-Gokcen International Airport in Istanbul, the Mali International Airport in Maldives, the Hyderabad International Airport and the New Delhi International Airport in India.

“Even though there is some pessimism due to the crisis in Europe, demand for air travel in Asia-Pacific remains high. In this region, there is no way you can travel from city to city by land, thus air travel is still preferred. And for the last five years, Asia-Pacific has been leading the way,” he told reporters at the group’s corporate headquarters yesterday.

Total passenger movement at MAHB's airports in Malaysia rose to 64 million passengers in 2011 from 57.8 million passengers in 2010 on strong demand for air travel in Southeast Asia and Asia-Pacific.

According to Faizal, the growth in revenue for 4Q11 was due to an 8.3% rise in airport operations, driven by an 8.7% increase in aeronautical revenue on higher passenger growth and implementation of new rates.

However, the increase in passenger service charge (PSC) revenue was negated by a lower marginal cost support as MAHB is no longer entitled to claim for support upon the implementation of new rates.

For FY11, aeronautical revenue increased by 2.3% to RM889 million from RM868.7 million in FY10, while non-aeronautical revenue rose 11.3% to RM897.8 million from RM806.5 million.

The group registered a revenue of RM2.75 billion for FY11, compared with RM2.47 billion for FY10, an increase of 11.6% year-on-year (y-o-y).

Earnings before interest, tax, depreciation and amortisation (Ebitda) grew 7.8% to RM826.5 million in FY11 from RM766.6 million in FY10, while PBT stood at RM574.1 millon, representing an increase of 20.9% from RM475 million.

Net earnings for FY11 were at RM401.2 million against RM317.5 million for FY10, rising 26.4% y-o-y.

“The strong PBT growth for FY11 was because of lower interest on borrowings due to the settlement of short-term borrowings at the end of 2010, higher dividends received from investments in unquoted shares, lower share of associate losses, as well as MAHB group’s cost saving initiatives resulting in lower professional, utility and communications fees,” MAHB group managing director Tan Sri Bashir Ahmad said in a statement.

In 2011, the group adopted IC Interpretation 12: Service Concession Arrangements (IC 12), which means MAHB recognises the construction revenue and costs in accordance with FRS 111.

Revenue from construction in FY11 grew by 25.2% to RM820.5 million, compared with RM655.1 million in FY10.

“Excluding the IC 12 effects, revenues generated by our airports’ operations segment improved by 6.7% to RM1.79 billion. Aeronautical revenue which improved by 2.3% on stronger passenger numbers was impacted by the accrual of airline incentives in FY11 amounting to RM91.8 million compared with RM31.1 million accrued in FY10.

For FY12, Faizal said the group remains optimistic of the growth of passenger movement, which normally tracks the GDP growth.

He said the group expects growth of between 6% and 7% in passenger movement at Malaysian airports, lower than last year’s rate of 10.7% due to economic uncertainty in the eurozone and the US.

“This year will remain challenging, especially in terms of international passenger growth due to economic uncertainty in Europe and the US. However, the 600 million population in Southeast Asia will continue to support international passenger traffic at Malaysian airports. People will still fly to closer destinations such as Bandung, Bali, Phuket and Koh Samui,” said Faizal.

He added that international passengers, whether to European or Asian cities, still pay the same amount of airport tax at RM65 per traveller.

In terms of total revenue per passenger, MAHB collected RM29.86 per passenger in FY11, compared with RM30.49 in FY10. Aeronautical revenue contributed RM13.89 per passenger in FY11, down from RM15.02 per passenger in FY10, while non-aeronautical revenue increased to RM14.03 per passenger from RM13.95.

Faizal said the group expects to raise the share of non-aeronautical revenue per passenger to RM15 and total revenue per passenger to RM30 in FY12.

There are about 60 airlines operating at the Kuala Lumpur International Airport (KLIA) currently and MAHB hopes to attract at least five new airlines this year.

Last year, five airlines resumed or started operating out of KLIA. They are Egypt Air, Lion Air, TransAero, Air Koryo and Sky Aviation.

Negotiations are still ongoing to get Qantas and British Airways to resume their operations at KLIA as these two are the major airlines that have stopped their services to KLIA in recent years.

On media reports that S7 Airlines from Russia may service the Moscow-Kuala Lumpur route, Faizal said talks with the airline are still ongoing. At present, the route is only served by TransAero.

For FY12, MAHB’s headline key performance indicators include Ebitda of RM822 million, which is lower than last year’s and return on equity of 10.42% this year compared with last year’s 11.67%.

This article appeared in The Edge Financial Daily, February 22, 2012.