2Q2019 RESULTS BRIEFING 13 August 2019 DISCLAIMER The presentation is dated the day it is given. The delivery of this presentation shall not, under any circumstances, create any implication that there has been no change in the affairs of the Company since such date. The third party information and statistical data in this presentation have been obtained from sources the Company believes to be reliable but in no way are warranted by the Company as to accuracy or completeness. This presentation may not contain all material information concerning the Company and the information set forth in this material is subject to change without notice. These materials included herein that are not historical facts are forward-looking statements. Such forward looking statements involve a number of risks and uncertainties and are subject to change at any time. In the event such risks or uncertainties materialize, AAV’s results could be materially affected. The risks and uncertainties include, but are not limited to, risks associated with the inherent uncertainty of airline travel, seasonality issues, volatile jet fuel prices, world terrorism, perceived safe destination for travel, Government regulation changes and approval, including but not limited to the expected landing rights into new destinations. This presentation is strictly not to be distributed without the explicit consent of Company’s management under any circumstances. 1 Others THAILAND MARKET US 4% 4% E.Asia 68% S.Asia 6% EXPECTED OVER 40 MILLION VISITORS IN 2019 OR 5% YOY 1H19 International Tourists Achieved 19.8 million or Up 1% YoY EU 18% 20 1 million LCC penetration 36% 36% OVERALL Europe 2H19 visitors expected to grow 7% to 20 mil 31% 30% 55% 52% 52% 51% 49% CHINA 48% Edged down 5% YoY and 29% contribution North America ASEAN South Asia Thailand SE Asia Grew 5% YoY and 26% contribution EUROPE Edged down 2% YoY and 18% contribution SOUTH ASIA 2018 2019 Grew 20% YoY and 6% contribution 1 source: CAPA 2 KEY HIGHLIGHTS 2Q2019 ► AirAsia bagged "World's Best Low Cost Airline" for the 11th Consecutive Year. ► Passengers grew 5% on the back of an 8% capacity growth. ► ASK rose 12% as launching 7 new routes. 40% 2.3 mil (+16%) ► Average fare was at Baht 1,390 per pax down 1%, resulting from the 5.6mil sluggish growth of tourism and Baht appreciation. 60% 3.3 mil (-1%) (+5%) ► Ancillary revenues were Baht 1,876 million up 15% or Baht 336 per pax up 9% YoY, due to dynamic pricing and value pack enhanced seat selection and inflight revenues. ► CASK was 1.57 Baht down 2% YoY. Fuel per ASK was 0.55 Baht Load Factor On-Time Utilisation down 6%, while CASK ex-fuel was 1.02 Baht unchanged YoY. ► Core Revenues were Baht 9,609 million, up 6% YoY with 10% EBITDAR Margin. ► TAA & AAV reported net loss of Baht 879 million and Baht 482 million down 55%, YoY respectively. ► Net gearing was at 2.37x with a cash balance at Baht 2.8 billion. 83% 86% 12.5hrs 3 PERFORMANCE HIGHLIGHTS 1H2019 TOTAL REVENUES EBITDAR TAA NET PROFIT AAV NET PROFIT 21,638 3,880 24 15 million Baht million Baht million Baht million Baht 4% YoY -20% YoY -98% YoY -98% YoY • Total revenues increased 4% due to an increase in ancillary revenues and number passengers, despite lower average fares mainly from the china market. • Operating profits dropped YoY mainly from staff costs and fuel costs along with a rise in fuel consumption. ASK RASK CASK CASK EX-FUEL 13,777 1.51 1.55 1.01 million Baht Baht Baht +11% YoY -8% YoY -1% YoY +1% YoY • ASK up by 11% YoY due to the international route expansion, despite an 8% decrease in RASK. • CASK almost unchanged from the same period last year as a result of the high utilisation, while CASK ex-fuel increased partly the recognition of the additional long-term employee benefit liabilities of Baht 111 million. 4 DIGITAL TO ENHANCE ANCILLARY 2Q19 ACHIEVED 1,876 MB (+15%YOY) OR BT 336 PER PAX (+9%YOY) OTHERS (Cargo, Tune, Fees) • Fee structure adjustment; processing fee • Fly-Thru lounge access 6% FLY-THRU • 2Q19 up by 76% from an increase in AirAsia Group flights, reflected a 79% growth in traffics 9% • Fly-Thru pax was at 7% of total pax SEAT SELECTION 8% 19% • 2Q19 up by 30% YoY • Emphasis on dynamic pricing and Value Pack, Revenues Government and Premium Flex with travel protection 48% IN-FLIGHT SERVICES • Continue promoting pre-book In-flight combo set • Enhance house-brand on F&B • Launch “Magic Journeys” merchandise. CHECKED BAGGAGE • 2Q19 up by 4% YoY, relating to international passenger growth 5 COST BREAKDOWN Fuel costs in 2Q19 grew 6% along with a 14% rise in the 35% Fuel Costs fuel consumption, despite a 4% decrease in fuel price. TAA has hedged 65% of Brent at an effective cost of Jet at $76/bbl and $74/bbl for 2019 and 2020. Staff Costs Sensitivity: +/- 1 Baht against USD equal +/- 5 USD per 15% barrel Jet Hedge Position Aircraft and Aircraft 2019 AirAsia Group 2020 13% Engine Rental 1Q 2Q 3Q 4Q 1H19 Current Hedge Ratio 53% 52% 70% 85% 73% Avg Brent Hedge Ramp and Airport 67 64 62 61 60 (USD – jet kero) 12% Operation Hedge Cost Repair and Maintenance 81 78 77 76 75 9% (USD – jet kero) Selling and Administrative Effective Cost 6% 78 77 76 75 74 (USD – jet kero) 10% Other costs Note: Information as of Aug 12, 2019 * Excluding D Factor and Excise Tax 6 Regional DOMESTIC MARKET IN 4M20191 Capacity2 % 65 Thai Regional VietJet, Market 6.0% Thai AirAsia, 32.7% Thai Airways, 7.0% MARKET SHARE1 BY Unique routes 3 13 Thai Smile, PAX FLOWN 9.4% 23 Destinations Thai Lion Air, Nok Air, 15.7% 10 18.4% City transfer routes 11 Note: 1 4M2019 (Source: AAV, AOT and Department of Airport) Island transfer routes 2 Capacity share as of FY2019 (source : OAG) 3 As of April 30 2019 7 MORE RATIONAL COMPETITION IN DOMESTIC MARKET DECELERATED GROWTH SPUR AVG. FARE THAILAND DOMESTIC CAPACITY AirAsia Capacity Unit : million 48.38 49.55 47.49 2019 32% 27.24 2018 31% 2013 2014 2015 2016 2017 2018 2019 (source : OAG) 8 ROUTE NETWORK PROACTIVE STRATEGY OF EXPANDING TO INDIA AND AROUND INDOCHINA ADD FREQUENCIES: NEW ROUTE: 2Q19 DMK – Roi Et CNX – Danang DMK – Khon Kean DMK – Nha Trang DMK – Shenzhen DMK – Can Tho CEI – Shenzhen CNX – Shenzhen DMK – Ahmedabad HKT – Phnom Penh 3Q19 DMK – Sihanoukville 4Q19 DMK – Jaipur 9 FLEET PLAN • New A321 NEOs aircraft are fuel efficient & have lower cost per seat (>50 seats) • A321 NEOs aircraft deliveries from 2020 onwards to break the airport’s bottleneck CUMULATIVE FLEET A321 NEOs A320 FLEET PROFILE Unit: Aircraft 2 5 AVG age : 6.3 Yrs 62 61 57 Operating leases 41 Finance leases 15 Owned 6 2018 2019F 2020F Note: 1 Information as of June 30, 2019 Neo: 11 Aircraft, CEO : 51 Aircraft (OP-AAM 17, OP 3rd Party 24) 62 63 62 10 COMPANY GROWTH STRATEGIES Revenues by routes in 5-year Growth in ancillary to % revenue each year, expected Diversify +1 to see 25% in next 5 yrs SOUTH ASIA, 10% Network ASEAN ex Growth in cargo revenue CLMV, 10% DOMESTIC, +10% each year, cooperate with Teleport 45% Revenue CLMV, 15% Growth Growth in Fly-Thru passengers +2% each year CHINA, 20% Cost Reduction U-Tapao Airport Training Academy MRO center • Develop U-Tapao Airport to turn • Invest in pilot training academy and • Interested to invest in a MRO center Thailand into Asean's aviation hub flight simulator center in Thailand (10% stake) • Aim to reduce cost >100 MB • Subject to government approval 11 THE CATALYST AVERAGE FARE 2019-2020 ECONOMIC OUTLOOK Improve airfare with AIRCRAFT UTILISATION Political stability, a solid load factor Fleet and Slot management to GDP Growth at 3.7-3.9% enhance the utilisation rate to 12.5hrs TOURISM STIMULUS Waive VOA fees until 31 October 2019 EXCHANGE & INTEREST RATE • Baht strengthen ahead of other regional currencies CAPACITY • Fed & BOT cut policy rate by 0.25ppt Grow up to 11% YoY FUEL OIL FLEET Take new A321neo from 2019 onwards EIA forecasts Brent prices will avg. $64/b in 2H19 and $65/b in 2020 as production growth outpaces consumption growth. COST DEDUCTION COMPETITION Increase cost efficiency & productivity More rational competition in domestic market, • Driving fuel usage through data analytic reflected in a 4% deduction in capacity • Predictive maintenance to increase efficiency • A321neo aircraft are fuel efficient & have lower NETWORK cost per seat Rationalise route network • Capacity Management ANCILLARY Improve up to 10% YoY driven from data team centre of excellence 12 www.aavplc.com Investor Feedback [email protected] +662 5625745-6 Don Mueang International Airport, 3rd Fl., Central Office Building, No.3200,Vibhavadi Rangsit Road, Sanambin, Don Mueang, Bangkok 10210 TAA : KEY STATISTICS 2Q2019 2Q2018 Change 1H2019 1H2018 Change Passenger carried (Million seats) 5.58 5.31 +5% 11.44 10.95 +4% International passenger 2.25 1.95 +16% 4.67 4.06 +15% Domestic passenger 3.33 3.36 -1% 6.77 6.89 -2% Capacity (Million seats) 6.75 6.28 +8% 13.26 12.50 +6% Load factor 83% 85% -2 ppt 86% 88% -2 ppt RPK (Million) 5,643 5,194 +9% 11,794 10,812 +9% ASK (Million) 6,903 6,147 +12% 13,777 12,391 +11% No. of stages flown 37,364 34,771 +7% 73,425 69,277 +6% Average stage length (km) 1,023 978 +5% 1,039 991 +5% Fleet size (Aircraft) 62 59 +3 62 59 +3 Aircraft utilisation (Hours/day) 12.5 11.9 +0.6 12.5 12.2 +0.3 On time performance 86% 87% -1ppt 85% 84% +1ppt Average fare (Baht) 1,390 1,402 -1% 1,474 1,537 -4% RASK (Baht) 1.39 1.47 -5% 1.51 1.64 -8% CASK (Baht) 1.57 1.59 -2% 1.55 1.56 -1% CASK ex-fuel (Baht) 1.02 1.02 0% 1.01 1.00 +1% 14 TAA STATEMENT OF COMPREHENSIVE INCOME Unit: Baht million 2Q2019 2Q2018 Change 1H2019 1H2018 Change Revenue from sales and services 9,609 9,051 +6% 20,764 20,305 +2% Gain on exchange rate 212 - N.A.