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The Digital Airline GCEO’S Statement DEAR VALUED SHAREHOLDERS, It is an honour and privilege to present this statement as Group CEO of AirAsia X, a position to which I was appointed at the beginning of November 2018. An honour because in assuming my position I am stepping into the shoes of not just one but two great Asean aviation leaders – Tan Sri Tony Fernandes and Datuk Kamarudin Meranun, who founded AirAsia X and were co-Group CEOs before me. And a privilege because AirAsia X is the pioneering long-haul low-cost airline in the region, stimulating demand where previously there was none, winning countless awards as we make millions of exciting travel dreams come true. hen Tony and Kamarudin set up AirAsia X 11 years ago, many said the airline would never take off. A low-cost carrier for short-haul flights – yes. But, low-cost for long haul – it has never been done before! Yet AirAsia X has proven the Wsceptics wrong. It took a few years to fine-tune our model; however, in 2016, we finally did it – we achieved our first full-year of profit. We repeated the feat in 2017, demonstrating it was not just a one-off. In 2018, unfortunately, we experienced a setback. But this was mainly due to factors beyond our control, such as the 28% increase in fuel cost, currency volatility, natural disasters in the markets we serve, and general elections in Malaysia, which is our home base and where most of our routes originate. Despite these challenges, 2018 marked a year of growth. We made all the right moves in 2018 by cutting cost further, adding capacity, and capturing greater market share even as the airline posted its first losses since 2016. It was the first year since 2015 that we took in new aircraft, a total of five on lease – two for Malaysia and three for Thailand. We expanded the Group network with a net addition of four new destinations for AirAsia X Malaysia and two for AirAsia X Thailand. New routes developed support our strategy of establishing country dominance, namely strengthening our position in core markets – Greater China, Japan, South Korea and India. It saw us introduce flights from Kuala Lumpur to two destinations in India – Amritsar and Jaipur – where we were already serving New Delhi; as well as Changsha and Tianjin in China where we were already operating flights to Beijing, Shanghai, Hangzhou, Wuhan, Xi’an, Chengdu and Chongqing. From Bangkok, we introduced flights to Nagoya and Sapporo. We also increased the frequency of flights to Greater China, Japan and South Korea. 64 AirAsia X Berhad (734161-K) We made all the right moves in 2018 by cutting cost further, adding capacity, and capturing greater market share. NADDA BURANASIRI GROUP CHIEF EXECUTIVE OFFICER Annual Report 2018 65 The Digital Airline GCEO’s Statement AirAsia X Group increased the number of guests carried during the year by 10%, from 7.8 million in 2017 to 8.6 million in 2018. While building our key markets we also pulled out of A drastic cost saving move was to shift our base in Melbourne countries where we were serving just single destinations, from Tullamarine Airport to Avalon Airport, which to us namely Tehran in Iran; Male in the Maldives; and Kathmandu is ideal for low-cost carriers as its focus is to make flying in Nepal. The only destination left in our expanding network easier through ‘convenient, uncomplicated and time-efficient that is an exception to our country dominance strategy is service’ and ‘pocket-friendly fares’. Cost savings from use of Honolulu which, however, has such an exceptionally strong the airport will be translated into even more attractive fares tourist pull that our being the only low-cost airline in Asean to for our guests. We are the first international carrier to fly to fly to this destination ensures constantly high load factors. In Avalon Airport and are confident the move will bring in the fact, this route has proven so successful that we increased the numbers to secure Melbourne as one of our more popular frequency of flights from four times a week initially to daily in destinations. Although we did not build much capacity to August in order to cater to demand. Australia this year, it remains one of our core markets and our associate in Thailand has plans to penetrate the continent in Overall, through our route rationalisation, AirAsia X Group the near future, once it receives more aircraft. increased the number of guests carried during the year by 10%, from 7.8 million in 2017 to 8.6 million in 2018. AirAsia X Thailand, in fact, was a star performer in the Group during the year, further validating our long-haul low-cost We realise that the bigger our airline becomes, the more model. Without some of the constraints that faced the imperative it is to operate as leanly and efficiently as possible. Malaysian operations, Thailand pulled in an exceptionally Hence, we continued to constantly review our cost structures strong set of results to achieve a record net operating profit and seek ways to trim any unnecessary expense. This is of USD12.0 million. something that is truly part of our DNA as it is integral to the AirAsia business model. Indeed, being part of the AirAsia Following a strategy it called ‘Master of Japan Network’, family provides additional avenues for cost saving, especially our associate launched the Nagoya and Sapporo routes, as now as the Group is progressing towards the One AirAsia mentioned earlier, while increasing its flight frequency to concept. Under One AirAsia, various commercial, engineering Tokyo (Narita). These led to a 17% increase in capacity, and a and procurement functions are being streamlined and total of 1,154,202 guests carried to the Land of the Rising Sun. centralised to avoid duplication and create greater resource Although the load factors to Nagoya and Sapporo averaged efficiencies. We also continue to leverage AirAsia’s expansive 75% and 72% respectively, we are confident of the numbers network as a funnel into our own routes. The combined route increasing as the routes mature. A key challenge for Thailand networks of AirAsia and AirAsia X Groups is truly one of our now is to meet an internally set target of growing the number greatest strengths and something that sets us apart from of guests carried in 2019 by 50% along with a fleet expansion other long-haul low-cost airlines. from nine to 14. 66 AirAsia X Berhad (734161-K) We are building up our Thai operations’ fleet, with two out of five aircraft to be received being brand-new Airbus A330neo Our operations in Indonesia, meanwhile, was plagued by The price of fuel has begun to stabilise, enabling us to a series of natural disasters – including earthquakes and hedge a significant portion of our requirements for the year tsunamis across the vast archipelago – following Mount at reasonable prices. This, combined with intense focus on Agung’s continuous eruptions since November 2017. To cost-saving initiatives, will drive our cost down, providing manage the drop in tourist numbers, in May we adopted a the impetus for further growth. Growth is certainly on the dual-hub strategy, operating out of Jakarta in addition to our cards for AirAsia X Thailand, which is preparing for a listing original base in Bali. However, performance did not pick as at the end of 2019. Already performing very well, funds from well as we hoped, leading management to make the difficult the initial public offering (IPO) will stand it in good stead yet strategic decision to operate AirAsia X Indonesia on a to accelerate its onward journey. Malaysia, meanwhile, will non-scheduled commercial airline basis. Its last route, from continue to strengthen its route network while supporting Bali to Tokyo (Narita), was terminated in January 2019. and receiving support from its associate in Thailand and the rest of the AirAsia Group. Looking forward, we have some very firm plans to guide our continued growth. While we will be looking to optimise These are certainly very exciting times for us. The year 2018 our Malaysian route network, we are building up our Thai brought mixed fortunes for the different AOCs, but I believe operations’ fleet, with two out of five aircraft to be received we are more aligned now and stand stronger as a Group as being brand-new Airbus A330neo. These open up some we enter the year 2019. All the building blocks are in place to very exciting possibilities. The sheer number of destinations launch AirAsia X into a brighter future. With the continued that lie within a 10-hour flying radius from Bangkok is support of our Allstars, we are ready to take this metaphorical dizzying; we are almost too spoilt for choice. Having learnt X-tra long leap together. Our Allstars are our heroes, giving us from experience, however, we will seek either to continue to their all over the last 11 years. We could not have got to where build on our market dominance strategy or launch another we are today without them, and we are determined to take Honolulu, or two. them with us as we reach for the skies. My own ‘key personal indicator’ is to ensure AirAsia X Group – Malaysia and Thailand – works together closely to achieve Thank you. our common goals while also capitalising the synergies of operating in a more interconnected manner with AirAsia Nadda Buranasiri Group. A key area that we have yet to fully leverage is our Group Chief Executive Officer sister airline Group’s extensive data accumulated from more AirAsia X Berhad than half a billion guests.

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