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AirAsia blames higher fuel and finance costs for drop in profits

Higher fuel and finance costs resulted in the first drop in profits in five quarters at budget carrier Air Asia.

Quarterly net profits at the Malaysia-based airline dropped by 39% to 104.8 million ringgit ($35 million) in the period to March 31, based on revenue up 11% to 1.30 billion ringgit.

AirAsia’s passenger numbers rose 7% to 5.2 million in the period, and average fares increased by 2%.

Fuel costs rose 18% in the quarter to 523 million ringgit, while aircraft lease expense climbed 11% to 44.7 million ringgit.

AirAsia also had a foreign exchange loss of 37.7 million ringgit on its borrowings, compared with a gain of 88 million ringgit a year earlier.

Group chief executive Tony Fernandes said the carrier had potential for “double digit” growth this year with expansion into India and the Philippines where it has taken a 49% stake in Zest Airways.

Indian operations are due to start in the fourth quarter in partnership with the country’s Tata Group.

He described the only “blip” in the quarter as being foreign currency.

“If you take that out we grow profit by 10%,” he told Bloomberg TV, with Thailand and Indonesia operations having “stellar results”.

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