AirAsia faces challenges in Indonesia, Philippines & Thailand as all affiliates post 2Q2014 losses

AirAsia had one of its most challenging quarters in its 13-year history in 2Q2014 as overcapacity and intense competition across Southeast Asia impacted the group's profitability. While the AirAsia Group's Malaysian subsidiary remained profitable in 2Q2014, albeit with one of its lowest operating margins in several years, all of the group's overseas affiliates incurred losses.

The group's oldest and most established affiliate, Thai AirAsia (TAA), had a rare loss as political instability impacted inbound demand while domestic competition intensified. But TAA should also see an improvement in 2H2014 as Thailand's tourism sector begins to recover and it starts to get feed from its new long-haul sister carrier, Thai AirAsiaX (TAAX).

The biggest medium and long-term challenges are in Indonesia and the Philippines, where AirAsia has been restructuring networks as part of turnaround initiatives. The group has decided to cut its fleet in the Philippines by eight aircraft while fleet growth at Indonesia AirAsia has been frozen for a second year, which will keep the airline at the 30 aircraft mark for all of 2014 and 2015. This second instalment of a three-part report on the AirAsia Group's 2Q2014 results deals with Thai AirAsia.