AirAsiaBerhad - AirAsia Malaysiastgsfcms.airasia.com/.../AirAsia/IR/annual-report-corporate-2007.pdfAirAsiaBerhad(“AirAsia”or“theCompany”) isanamesynonymouswithlowfares,

AirAsia Berhad (284669-W)

25-5, Block H, Jalan PJU 1/37, Dataran Prima, 47301 Petaling Jaya, Selangor Darul Ehsan, MalaysiaTel : (603) 78809318 Fax : (603) 78806318 E-mail : [email protected] Website : www.airasia.com

Our Dreams andAspirationsTo be the largest low cost airline in Asiaserving the 3 billion people who currentlyare underserved with poor connectivity andhigh fares.

� To be the best company to work forwhere employees are treated as part of abig family

� Create a globally recognised ASEANbrand

� To strive for the lowest cost so that all ofthe 3 billion people can fly with AirAsia

� Maintain the highest quality productusing the best technology to reduce costand enhance service level

C O N T E N T S

� Our Dreams and Aspirations2 Corporate Profile4 Five Year Financial Highlights7 Share Performance8 Chairman’s Statement

12 Group Chief Executive Officer’s Report20 AirAsia’s Strategy for Success22 Route Network24 Safety26 Product Development30 Go Holiday32 The Sky is Your Limit34 Champion of Low Fares36 AirAsia Roars Into Formula One40 One AirAsia42 Our People, Our Pride43 Investing In Our Future44 Major Milestones46 Serving You Better from

Our 2nd LCC Terminal47 Awards & Accolades48 AirAsia Cares52 AirAsia Group53 Corporate Information54 Board of Directors56 Directors’ Profile60 Senior Management62 Senior Management Profile66 Managing Risk to Maximise Returns68 AirAsia Financial Snapshots72 Statement on Corporate Governance76 Audit Committee Report81 Statement on Internal Control82 Additional Compliance Information83 Financial Statement

152 Analysis of Shareholdings156 List of Properties Held157 Notice of Annual General Meeting

� Proxy Form

AirAsia Berhad | annual report 2007

AirAsia – Asia’s low cost leader

COUNTRY OF OPERATIONS

AirAsia flies to over 86 routesacross 11 countries in ASIA.

Malaysia AirAsia was incorporated on 20 December 1993.Currently Malaysia has a staff stength of 2,924.

Thai AirAsia was launched on 3 February 2004 as our first joint venture.Currently Thailand has a staff stength of 1,381.

Indonesia AirAsia was launched on 8 December 2004. This is our secondassociate in the region. Currently Indonesia has a staff strength of 745.

MALAYSIA

THAILAND

INDONESIA

Malaysia Thailand Indonesia

Singapore Philippines Cambodia

Brunei Vietnam Myanmar

Laos Macau China

Vietnam

Cambodia

Laos

Thailand

Myanmar

Malaysia

Singapore

Indonesia

Philipines

Macau

China

2 > AIRASIA BERHAD > annual report 2007

AirAsia Berhad (“AirAsia” or “the Company”)is a name synonymous with low fares,quality service and dependability. With over86 routes across 11 countries, AirAsia is trulyAsia’s leading airline with the widest routeconnectivity and largest customer base.With the unmistakable tagline, “NowEveryone Can Fly”, AirAsia has made flyingaffordable for more than 40 million guests.

Against All OddsIn 2001, Dato’ Tony Fernandes along with Dato’ Pahamin Ab.Rajab (Chairman, AirAsia), Dato’ Kamarudin bin Meranun(Deputy Group Chief Executive Officer, AirAsia) and AbdulAziz bin Abu Bakar (Director, AirAsia) formed a partnershipto set up Tune Air Sdn Bhd and bought AirAsia for a tokensum of RM1.00. With the help of Conor Mc Carthy (Director,AirAsia; Director, former Director of Tune Air Sdn Bhd andformer Director of Group Operations, Ryanair), AirAsia wasremodeled into a low cost carrier and by January 2002,their vision to make air travel more affordable forMalaysians took flight.

Valued at RM4.5 billion, AirAsia is today an award winningand the largest low cost carrier in Asia. From a two aircraftoperation of Boeing 737-300, AirAsia currently boasts a fleetof 60 aircraft that flies to over 50 domestic andinternational destinations and operates over 400 domesticand international flights daily from six hubs located at LowCost Carrier Terminal (KLIA), Johor Bahru, Kota Kinabalu,Kuching, Bangkok (Thailand) and Jakarta (Indonesia). AirAsiais fast spreading its wings to create a bigger and moreextensive route network through its associate companies,

Thai AirAsia and Indonesia AirAsia. The airline has carried,thus far, over 40 million guests since its first day ofoperation.

Bringing Asia CloserAt AirAsia, we are bringing people closer by bridgingboundaries through our philosophy of offering low fares. Ithas sparked a revolution in travel, as more and morepeople from all walks of life are now able to fly for the firsttime, while many others have made air travel with AirAsiatheir preferred choice of transport even within Malaysia. Weare consistently adding new routes, which include city pairsthat never existed before, in our relentless efforts to createa seamless bridge of unity across ASIA. It is something veryclose to our hearts as we continuously strive to promote airtravel and create excitement amongst our guests with ourrange of innovative products and personalised services.

The Foundation of Our BusinessAirAsia’s success has taken flight through the continuedconfidence of our guests who prefer a no-frills, hassle-free,low fare and convenient option in air travel. The key todelivering low fares is to consistently keep cost low.Attaining low cost requires high efficiency in every part ofthe business and maintaining simplicity. Therefore everysystem process must incorporate best industry practices.We make this possible through the implementation of thefollowing key strategies:

� Safety First – Safety is the single most importantcriteria in every aspect of the operations, an area thatAirAsia will never compromise on. AirAsia complieswith the conditions set by regulators in all thecountries where the airline operates. In addition,AirAsia partners with the world’s most renownedmaintenance providers to ensure that its fleet is alwaysin the best condition.

C O R P O R AT E P R O F I L E

� High Aircraft Utilisation – AirAsia’s high frequencyflights have made it more convenient for guests totravel as the airline implements a quick turnaround of25 minutes, which is the fastest in the region. This hasresulted in high aircraft utilisation, lower costs andgreater airline and staff productivity.

� Low Fare, No Frills – AirAsia targets guests who areprepared to do away with frills such as meals, frequentflyer miles or airport lounges in exchange for fareslower than those currently offered without comprisingon quality and service. Guests have the choice ofbuying exclusively prepared meals, snacks and drinksfrom our in-flight service at an affordable price.

� Streamline Operations – Making the process assimple as possible is the key to AirAsia’s success. Weare working towards a single aircraft fleet; this greatlyreduces duplicating manpower requirements as well asstocking of maintenance parts. There is only one classseating, i.e. first class, and passengers are free to sitwhere they choose.

� Lean Distribution System – AirAsia offers a wide andinnovative range of distribution channels to makebooking and traveling easier for its guests. AirAsia’sticketless service provides a low cost alternativeto issuing printed tickets.

� Point to point network – The LCC model shuns thehub-and-spoke system and adopts the simple point-to-point network. Almost all AirAsia flights are short-haul (3 hour flight or less). The underlying business isto get a person from point A to B.

Our CommitmentAirAsia has a firm commitment with a purchase order for200 Airbus A320 aircraft (150 firm + 50 options), thussecuring our growth pipeline up till 2013. We arecommitted to be a truly Asian airline that operates anextensive route network, fosters economic prosperity,stimulates tourism and promotes stronger culturalintegration. AirAsia is poised to be the largest and youngestairline in the region.

a revolutionary name in air travel reaches greater heightswww.airasia.com


F I N A N C I A L H I G H L I G H T SF I V E Y E A R

For the year ended 30 June 2003 2004 2005 2006 2007(RM million, unless otherwise stated) (restated)

Revenue 330 393 718 1,071 1,603Total expenses 318 332 596 997 1,322EBITDAR 95 116 209 154 490EBIT 12 61 122 74 281Associates contributions 0.0 (0.1) (5.4) (0.5) (3.9)Profit before tax 11.5 58.1 114.6 86.2 278.0Tax 7.4 (9.1) (14.3) 115.5 220.0

Net income * 18.8 49.1 100.8 201.7 498.0

BALANCE SHEETCash & cash equivalent 34 66 329 426 595Total Assets 124 350 1,123 2,574 4,779Net Debt (Total Debt – Total Cash) (34) 29 (329) 627 1,959Shareholders' Equity 49 150 953 1,148 1,662

CASH FLOW STATEMENTSNet cash from operating activities 15 29 (38) 282 595Cash flow from investing activities (22) (144) (297) (1,249) (1,943)Cash flow from financing activities 26 141 589 1,067 1,509

Net Cash Flow 19 26 254 100 161

CONSOLIDATED FINANCIAL PERFORMANCE (%)Return on total assets 15.2 14.0 9.0 7.8 10.4Return on shareholders' equity 38.4 32.7 10.6 17.6 30.0R.O.C.E (EBIT/(Net Debt + Equity)) 74.4 33.8 19.6 4.2 7.7EBITDAR margin 29.7 29.6 29.1 14.4 30.6EBIT margin 3.5 15.4 17.0 6.9 17.5Net Income margin 5.7 12.5 14.0 18.8 31.1

CONSOLIDATED OPERATING STATISTICSPassengers carried 1,481,097 2,838,822 4,414,069 5,719,411 8,737,939RPK (million) 1,539 2,771 4,881 6,702 9,863ASK (million) 2,086 3,592 6,525 8,646 12,391Load factor (%) 74 77 75 78 80Aircraft utilisation (hours per day) 12.5 12.8 12.1 12.0 12.0

Average fare (RM) 147 131 143 174 171Yield Revenue per ASK (sen) 11.1 10.9 10.2 12.2 12.9Cost per ASK (sen) 10.9 9.4 8.3 10.9 11.2Cost per ASK – excluding fuel (sen) 7.4 6.5 4.2 6.1 5.6

Yield Revenue per ASK (US¢) 2.92 2.87 2.69 3.29 3.64Cost per ASK (US¢) 2.86 2.47 2.19 2.95 3.16Cost per ASK – excluding fuel (US¢) 1.96 1.72 1.11 1.63 1.57

Number of Stages 14,461 25,106 40,679 48,339 68,195Average stage length (km) 975 967 1,024 1,163 1,088Average fleet size (Malaysia) 5.5 9.5 16.3 20.5 27.1Size of fleet at year end (Malaysia) 7 13 19 26 34Size of fleet at year end (Group) 7 17 27 42 54Number of employees at year end 648 1,382 2,016 2,224 2,924Percentage revenue via internet (%) 29 43 47 60 65

* Net income after minorities

AIRASIA BERHAD > annual report 2007 > 5


S H A R E P E R F O R M A N C E

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NOV 2006Announcement on 30 November 2006 of the unaudited consolidated first quarter results for thethree months ended 30 September 2006.

DEC 200613th Annual General Meeting (AGM) of the Company was held on 28 December 2006.

FEB 2007Announcement on 28 February 2007 of the unaudited consolidated second quarter results for thethree months ended 31 December 2006.

MAY 2007Announcement on 23 May 2007 of the unaudited consolidated third quarter results for the threemonths ended 31 March 2007.

AUG 2007Announcement on 30 August 2007 of the unaudited consolidated fourth quarter results for thethree months ended 30 June 2007.

Share Price Volume Traded

AirAsia Share Statistics

Share Price beginning : 150Share Price end : 190Year High : 211Year Low : 127

Volume traded (million) : 2,515Share turnover : 107%

“AIRASIA TODAY IS A GROUP WITH SALES IN EXCESS

OF RM1.6 BILLION, A PRESENCE IN 11 COUNTRIES

AND MORE THAN 5,000 EMPLOYEES.”

PAHAMIN AB. RAJABCHAIRMAN

C H A I R M A N ’ S S TAT E M E N T

Dear ShareholdersAirAsia has just completed its best financial year ever. This is

against a backdrop of exciting opportunities as well as a fair

share of challenges. AirAsia today is a group with sales in

excess of RM1.6 billion, a presence in 11 countries and more

than 5,000 employees. Earnings continued to improve

thanks to robust passenger growth and improved margins

in all business areas. This was despite the slowdown in the

Indonesian aviation industry, lower than expected tourist

arrivals in Thailand and increases in the price of jet fuel to

levels that only two or three years ago would have seemed

impossible. Our business model has weathered these

challenges, and coupled with our sound operational

performance, we have seen the Group produce record

profits.

The domestic rationalisation was the main focus of the

Group for the past year. This progressive decision by the

Malaysian Government has allowed the industry to compete

on the same basis which in turn has clearly defined the

premium and budget segment of the industry. AirAsia is

now the market share leader for domestic Malaysian

operations and a number of regional routes. In addition, the

Government has built a new low cost terminal in Kota

Kinabalu and subsequently reduced the passenger service

charges for travelers using the low cost terminals of Kuala

Lumpur and Kota Kinabalu. These positive developments

highlight that the Government understands and supports

the low cost airline industry.

AirAsia’s business has always had a long stride. As we grow

our Company across the region, we will continue to work as

one collaborative and seamless ASEAN airline, drawing on

local expertise and fully exploiting our Group processes and

knowledge. We will leverage on what is common between

all our markets and combine this with the local edge that

our companies are adept at.

I am pleased that we have met all our key performance

indicators, and in many cases, exceeded our targets. AirAsia

carried 14 million passengers across the Group; this

represents a growth of 50% against the previous year. The

Group has achieved a stellar performance in capacity

management with 80% load factor and 6% increase in

yields. Excluding fuel, our cost was actually lower than



budgeted thanks to the Airbus A320, which is delivering

tremendous cost and productivity benefits. This resounding

all round strong performance highlights the successful

execution of our corporate strategy and investments made

in the past.

AirAsia would not have been able to meet these challenges

without the commitment and dedication of our people, led

by Tony Fernandes and the team he heads. Their

determination, experience and creativity are needed to rise

to the challenges our business faces. I would like to thank

all our staff around the world for their contribution in 2007.

I am proud to recognise the value they have created for our

shareholders.

It is worth repeating, AirAsia is on the right track, as our

results for financial year 2007 clearly show. Our constant

efforts in lowering cost, expanding our route network,

developing innovative products and building a strong

ASEAN brand, will see us moving closer to being the most

profitable airline in the world. I can therefore promise that

the quest to be the best will never rest and we will have yet

another exciting period ahead of us.

Pahamin Ab. Rajab

Chairman

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Passengers Flown byAirAsia Group (‘000)

Load Factor (%)

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“THE GROUP HAS ACHIEVED A STELLAR PERFORMANCE IN CAPACITY MANAGEMENT WITH80% LOAD FACTOR AND 6% INCREASE IN YIELDS.”


“THE GROUP EXPANDED THENETWORK TO 19 NEWDESTINATIONS AND OPENED UPNEW BASES IN KOTA KINABALUAND KUCHING. ”

TONY FERNANDESGROUP CHIEF EXECUTIVE OFFICER


Dear Shareholders2007 was a fantastic year for AirAsia. The demand for ourlow fares and services was never better as we continued toachieve strong revenue and profit growth. It is all comingtogether for AirAsia. We continue to add another layer toour already strong foundation as we re-organised thebusiness to create a leaner, more resilient Company. Whatwe have now is the right structure and the right team.

The Group expanded the network to 19 new destinationsand opened up new bases in Kota Kinabalu and Kuching.We acquired a net addition of 12 aircraft into the fleet withthe delivery of 14 new Airbus A320 and the return of twoBoeing 737-330 on expiry of their lease within the period.We ended the year with a total of 54 aircraft, up from 42 inJune 2006. In 2007, the Group carried 14 million peopleacross our network, which represents a 50% growth from2006.

The Group’s operating results over the past year underscoretwo major highlights. The first is how effectively our peopleworked to meet customer needs during the highestdemand for air travel we have ever experienced. The secondhighlight was how well the team managed the robustcapacity growth of 41% across the Group. This was the firsttime that we achieved a load factor of 80% for the full year.Even more impressive is the accompanying higher yields.Furthermore, unit cost excluding fuel items improved by 8%.

I can never say this enough, our success and ability to meetthese challenges are attributed to the dedication andcommitment of the people of AirAsia. Our people’scommitment and efforts to meet our guests’ expectationsand our own goals are second to none. Not only did thisdedication allow us to withstand this challengingenvironment, but it resulted in a number of importantaccomplishments that will position AirAsia for our nextphase of growth. It goes without saying that AirAsia’s mainpillar of strength is the 5,000-plus people we haveemployed.

Strategic ActionsLet us turn the clock back for a moment to the early days ofAirAsia, when the new management took over andrevamped the airline as a low cost carrier. At that time, theairline industry was in a grim state due to the aftermath ofthe 9/11 terrorist attacks and a depressed global economy.Overcapacity and low barriers to entry had led to price wars.To compound matters, we were competing against a statesubsidised airline, the authorities were not familiar with thelow cost concept, airports were hesitant to offer concessionsand our brand recognition was in its infancy. We needed totake tougher actions to become a major market player –and we did.

In the past five years, we have maintained unwavering focusand discipline in the low cost model. In the process, wehave invested significantly to build a solid foundation and tocreate a platform for sustainable growth. We have built theAirAsia Academy develop high quality manpower inensuring seamless business growth. We are constantlyexpanding our route network, currently the mostcomprehensive in South East Asia. We are the largestdomestic airline in Malaysia and we are market leaders inalmost all the routes we serve. We have also secured ourgrowth pipeline with the purchase order of 200 Airbus A320aircraft - it is almost impossible for any airline to purchase anew narrow-body aircraft as the production backlogstretches to 2012. Our Malaysian operation now has theyoungest fleet of any airline in South East Asia and we willhave the youngest fleet as we induct more Airbus A320 andphase out the Boeing 737-300.

Every Ringgit we receive from our business comes back tobe used for the future benefit of the business. It begins withinvesting in employees, rejuvenating our aircraft fleet andupgrading infrastructure for continuous and disciplinedgrowth.

I am happy to say that all our corporate strategy andstrategic investments have yielded positive results. In 2007,our unit cost is the lowest reported in the world and ourprofit margins are among the best. Just imagine what wecan achieve in the future.

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Destinations Served ByAirasia Group

G R O U P C H I E F E X E C U T I V EO F F I C E R ’ S R E P O R T


Low Cost Carrier TerminalThe low cost carrier terminal (LCCT) in Kota Kinabalu wascommissioned on 14 February 2007. This terminal was builtto cater to the robust passenger demand for Kota Kinabaluand to upgrade it as the major hub for East Malaysia. TheKota Kinabalu base is growing from strength to strengthand currently houses three aircraft, with 27 daily flights to10 destinations across the region.

Altogether, there are three LCCTs across the region and theMalaysian Government has approved a master plan todevelop a new LCCT in Kuala Lumpur with a capacity of 30million passengers per year – up from the current 10 millionpassengers per year. This terminal will be designed toinclude a greater number of amenities, with significant retailcomponent and comprehensive connectivity via rail, busand other ground transports. Construction work may start asearly as 2010 and will take about two years to complete.When completed, this terminal will be the third largest inthe world and should comfortably serve as AirAsia’spermanent headquarters. This initiative is a testimony of theGovernment’s confidence and support for the low costcarrier industry.

Airbus A320Undoubtedly, the Airbus replacement programme is thebiggest contributor to our strong performance. The superioroperating economics and reliability of the Airbus A320aircraft has elevated our customer service delivery to ahigher level and the aircraft is proven popular among ourguests. As the number of Airbus A320 aircraft in our fleetincreases, we will continue to achieve greater reduction inoperational costs and further extend our competitive edge.Due to the proven success of the Airbus A320 aircraft, wehave increased our aircraft purchase order to 150 firm orderswith options to acquire up to a further 50 aircraft. Thispurchase order effectively secures our growth pipeline uptill 2013 while concurrently locking in the benefits of ouroriginal aircraft acquisition agreement.

One BrandBranding is a vital asset for a consumer driven companysuch as AirAsia. We will continue to focus a large share ofour marketing and resources on developing AirAsia as astrong ASEAN brand with global recognition. Our consumersshould always regard AirAsia as their first choice wheneverthey want to fly across the region. A strong brandcommands superior product differentiation, encouragesrepeat customers and customer loyalty, and is important forraising profitability.

We continue to invest significantly in our brand and haveleveraged our brand with the biggest sporting outfits in theworld. We are now an official sponsor of the AT&T WilliamsFormula 1 team for the 2007 season. In addition, we are alsoan official sponsor for the English Premier League. TheAirAsia brand will be featured on the referees’ uniform forthe entire 2007/2008 football season. We now have coveredalmost all of the world’s most popular sports and this hasmade us one of the most recognisable ASEAN brands in theworld.

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Future DevelopmentThe year 2007 was as exciting as it was challenging. Lookingforward, we are in an excellent position to capitalise on thegrowing demand for low cost travel and to registersignificant growth. The challenge now is to executedisciplined growth in capacity that matches the demandfrom our new and existing customers. Ultimately, we willcarry in excess of 50 million passengers per year by 2013with the current fleet growth plan, but it is critical thatgrowth occurs at a measured pace, driven by returns to ourshareholders and fully supported by market needs.

The competitive landscape and market dynamics will alwaysbe open to new challenges. To be successful, we must notonly stay abreast of developments; we must understandwhat people really want and drive the changes ourselves.Therefore it is important that we remain proactive to be onestep ahead of the competition and embrace changeswhenever necessary.

Finally, I would like to thank our shareholders for yourcontinued support of the Group. Our view going forward isthat sustainability in all areas should be rooted indemonstrated capabilities, proven results and solid long-term strategies. This approach will reward our shareholdersin the years to come.

Yours faithfully,

Tony FernandesGroup Chief Executive Officer

9.1%

60.2%

9.0%

4.9%

16.7%

5.7%

64.7%

7.0%

9.6%

13.0%

Distribution Mix

2007

2006

“WE WILL CONTINUE TO FOCUS A LARGESHARE OF OUR MARKETING ANDRESOURCES ON DEVELOPING AIRASIA AS ASTRONG ASEAN BRAND WITH GLOBALRECOGNITION.”

Internet

Travel Agent

Sales Offices

Call Centre

Airport Counters

Petronas Twin Towers , Kuala Lumpur

Every year, AirAsia is

helping millions of guests

discover a nation that is a

melting pot of various races

and religions, cultures and

traditions and yet

bonded by an identity

that is truly, uniquely

Malaysian. A nation that

is hailed as an excellent

model of unity in diversity.

malaysia

A I R A S I A’ S S T R AT E G Y F O R S U C C E S S

Our overall vision and goal is to continue to be the lowest costairline in the world and achieve sustainable profitable growth overthe long-term. We plan to accomplish this by implementing a wellthought out strategy and secure a strong foundation for ourbusiness. This strategy is to maintain a solid, long-term customerrelationship, efficient management of operations in order to growthe business, thereby increasing cash flows from operations. Toimplement this, the focus is to minimise costs, utilise existing assetsefficiently and carefully manage market risk while prudently growingcapacity by stimulating new markets.

Strategic priorities for AirAsia include:

� Controlling costs through a strong focus on efficient operationsand technology

� Developing human capital to capitalise on opportunities forfurther growth

� Expanding the route network to provide a long-term supply tothe market

� Managing the business through various economic cycles

� Building a strong ASEAN brand that is globally renowned

� Diversifying the customer base to strengthen market position

� Maintaining a strong focus on guest and employee safety

Continue to be the LOWEST cost airlinein every market we serve

ROE 10% Industry leading profit margins>–

Low Cost Efficiency Brand StrongCashflow

SAFETY

Vision

Goal

Foundation

Strategy

LOW

FARES

SERVICE

SI

MPLICITY


A c h i e v i n g h i g h e r p r o f i t a b i l i t y

AirAsia is constantly striving to improve profitability. Our focus is to further reduce

cost, enhance efficiency, develop new products and continuously strengthen our

brand globally. These are all vital components in our strategy to generate profit

margins that is the best in the industry.

CostEfficiency

Brand GrowthProductDevelopment

Over the past five years, the market for air travel has

converted from being the last option for travel – due to its

high cost nature, to being the most favoured option for

travel. Consumers appreciate the convenience of a fast,

hassle free and economical means of transportation and opt

for air travel whenever it is affordable. AirAsia has evolved

from a small niche airline which is consistently referred to as

“the other airline” to an innovative, market driven

company that builds on consumer insight and needs. Slowly

but surely, AirAsia will be referred to as “the airline”.

The number of new products and services created through

consumer focused product development is increasing

rapidly. This has led to a better product offering, and thus to

an increasing number of more successful launches. Low

costs, innovative products and a strong brand have enabled

AirAsia to create a foundation for higher profitability and

growth.

ImprovedProfit

Margins


R O U T E N E T W O R K

Malaysia

Kuala Lumpur (KUL - LCCT)� Alor Setar (AOR)� Penang (PEN)� Kota Bharu (KBR)� Terengganu (TGG)� Langkawi (LGK)

Johor Bahru (JHB)

Kota Kinabalu (BKI - LCCT)� Sandakan (SDK)� Tawau (TWU)

Kuching (KCH)� Miri (MYY)� Sibu (SBW)� Labuan (LBU)� Bintulu (BTU)

Thailand

Bangkok (BKK)� Surat Thani (URT)� Udon Thani (UTH)� Ubon Ratchathani (UBP)� Krabi (KBV)� Phuket (HKT)� Hat Yai (HDY)� Narathiwat (NAW)� Chiang Mai (CNX)� Chiang Rai (CEI)� Nakhon Si Thammarat (NST)� Khon Kaen (KKC)

Indonesia

Jakarta (CGK)� Banda Acheh (BTJ)� Medan (MES)� Pekan Baru (PKU)� Padang (PDG)� Palembang (PLM)� Bandung (BDO)� Solo (Yogyakarta) (SOC)� Surabaya (SUB)� Bali (DPS)� Balikpapan (BPN)� Batam (BTH)

Kuala Lumpur (LCC Terminal)

Johor Bharu (Senai Airport)

Kuching (Kuching International Airport)

Kota Kinabalu (Terminal 2)

Jakarta (Soekarno Hatta International Airport)

Bangkok (Suvarnabhumi International Airport)


China

� Xiamen (XMN)� Macau (MFM)� Shenzhen (SZX)

Myanmar

� Yangon (RGN)

Philipines

� Clarke (Manila) (CRK)

Vietnam

� Hanoi (HAN)

Laos

� Vientinne (VTE)

We serve over 86 routes across 11 countries across Asia.

We are continuously expanding our route network to

include well established destinations as well as pioneer

routes that have never been done before.

Cambodia

� Siem Reap (REP)� Phnom Penh (PNH)

Brunei

� Bandar Seri Begawan (BWN)

Singapore

� Changi (SIN)

No. of No. ofGuests (mil.) Year Routes

0.6 2002 6

1.5 2003 11

2.8 2004 26

6.3 2005 52

9.3 2006 65

14 2007 75


Performed on each and every transit stop of a flight. Visualinspections are conducted on the major components of theaircraft. While in transit, the pilot performs a test run on thesystem to make sure everything is performing as expected. Inthe event any irregularities are discovered during the transitstop, the pilot will engage the engineer to conduct a fullanalysis on the aircraft.

Performed at the end of each day. Our engineers andmaintenance crew clean and inspect the aircraft for any visualdefects, and conduct tests of the aircraft systems. Thisinspection includes the fuselage, wings, pylons and landinggears. Each daily check will require at least 2 hours.

Performed on the landing gear and generator and change offluid consumables. In addition, the emergency evacuationsystems and cargo compartment are inspected.

Performed every 400 flight hours. Detailed inspections areperformed on the electrical, hydraulics and static invertersystems.

Performed every 600 flight hours. This workshop visit willinclude replacements of consumables and some minorcomponent changes.

Performed every 6,000 flight hours. This workshop visit willinvolve replacement of major components as well as acomprehensive inspection on the whole aircraft. Depending onthe work required, a ‘C’ check can consume anywhere between4 days to 8 weeks in the workshop.

S A F E T YAirAsia considers safety to be THE single mostimportant aspect of our operations and it is a criteriathat we will never compromise. AirAsia is stringentabout complying with the highest internationalstandards and procedures set by the Malaysian CivilAviation Regulations. Safety procedures include strictaircraft maintenance, constant updating and training oftechnicians and flight crew.

Transit check

Daily check

Weekly check

‘E’ check

‘C’ check

400 flighthour check

The List of Checks for Airbus A320Our aircraft are put to a series of checks every day for its entire operating life. This isto ensure the safety of our guests and our people. The series of maintenance checksand inspections are listed below:

E

C



AirAsia has always been in theforefront to listen to our guests’feedbacks and respond to theneeds and fast pace change ofmarket trends . This is importantfor us to continuously enhance ourservices and cater to the diverseprofile mix of our guests as weexpand our network regionally.

Xpress BoardingAirAsia practices a free seating policy. This policy hasenabled us to consistently achieve a turnaround time of 25minutes for all of our flights.

We now offer, as an option, the choice of seats throughXpress Boarding. Xpress boarding allows guests to board anaircraft first, and choose a seat of their liking – be it awindow seat, aisle seat, front of aircraft or next to thelavatory. This service has proven to be exceptionally popularfor time hungry businesspeople, corporate employees onbusiness trips, and families traveling together.

Web Check-inFor a seamless, quick and convenient check-in, Web Check-in was introduced to enable those traveling withoutluggage. Guests may simply check-in via the webpage fromthe comfort of their homes or office, print out theirboarding pass and proceed to the airport at their leisure.

Self Check-in KioskSelf Check-in is also available. Our fiery red kiosks arelocated at the LCC Terminal, KLIA to enable a self check-inwith a touch of the screen.

E-Gift VoucherThe E-Gift Voucher is an innovative gift for all occasions aswell as being a much-appreciated corporate gift for its high-perceived value. Since its launch, the E-Gift Voucher hasproven itself to be a popular choice for those who want topresent imaginative gifts.

P R O D U C T D E V E L O P M E N T


Citibank AirAsia Credit CardOur partnership with Citibank has brought together twoorganisations that are leaders in their respective industries.Citibank is a highly recognisable brand in banking solutionswith strong regional and global presence. Our partnership,backed by our extensive network within the Asia region, willfurther reaffirm our unwavering commitment towardsbecoming a truly global brand. It also allows us to tap intoCitibank’s client database, and broaden our market segment.

The Citibank AirAsia credit card rewards cardmembers withpoints which are redeemable for AirAsia flights.Cardmembers will also enjoy priority booking duringpromotional campaigns.

AirAsia’s In-flight Services – Snack Attack!We pride ourselves in providing the fastest in-flight servicesin the region. Within 25 minutes, new carts loaded withfood, beverages and high-quality merchandise are efficientlystowed on the aircraft, ready for sale after take-off.

Our delicious menus are changed quarterly. All-timefavourite items such as Nasi Lemak are retained in themenu. New merchandise items like the Sports EditionWatches, Visit Year Malaysia 2007 Luggage Tag and AirAsiaPlaying Cards are fast becoming popular items onboardalongside with our best-selling signature AirAsia Polo T-shirtsand caps. We constantly introduce new products andrefresh our menus whilst maintaining our all-time favourites.


goholidayO N E S T O P O N L I N E

In line with AirAsia’s mission to make airtravel affordable, simple and easy foreveryone, we launched our online holidaypackages in August 2003. To date, our Do-It-Yourself (DIY) packages which comprises offlight and hotel bookings remain the mostpopular product. Travelers may also bookonline other travel related products such astours, transfers, activities, medical servicesand car rental.

Hotel Go Holiday now boasts 700 hotel partners inall the countries that we fly to. Our hotels range from high-end properties to budget hotels, enabling us to cater totravelers from all walks of life. Go Holiday’s wide roomselections; tight rate negotiation process that delivers thebest rates to our customers; interesting and user-friendlyweb layouts; introduction of multi-currency booking; andaggressive marketing campaigns, are among the factorscontributing to the popularity of this online service. Tofurther enhance our services, there will be cooperation planswith related tourism bodies, telcos and promotions throughcredit cards. As we expand our network, we will evenprogressively have additional languages to meet the

demands of our multi-racial and multi-lingual guests. Wealso take into account the importance of proper databasemanagement with the help of e-CRM marketing tools, wewill be able to understand our customers better by studyingtheir needs and travel patterns.

Flight + Hotel Package (DIY) is theconvenient way for guests to book any combination offlights and hotels at one stop and enjoy a more attractiverate. On top of providing hotel accommodation and flights,we also offer other services such as:

Tour & Transfer which added in October 2007,offering a variety of tour packages that cater for all segmentneeds, from adventure to luxury travels. In addition, productssuch as airport transfers, tours and activities ranging fromSpas to theme parks will be marketed online.

Go Medic is our specially designed online healthpackage to cater to the growth in health tourism. Currently,Go Medic has formed a partnership with three diagnosticcentres with potentially more hospitals and diagnosticcentres to be added to the service.

Go Car is our convenient, value-for-money online carrental service. Currently, Go Car has formed a partnershipwith three Car Rental Companies with potentially more localand international partners to be added to the service.

ObjectiveTo become a renowned one-stoponline travel portal in the region.

T R A V E L P O R TA L

We focus on simplicity,good value and goodvariety

Comprehensive andsimple distributionsystem

Do-It-Yourself

How are we lower in cost?

HotelsCurrently 700 hotel partners

Flights & HotelsConvenience in holiday/travel planning

Car RentalFuss-free rental of quality cars for businessand leisure travel

Medic ServicesReassurance of reliable and expert medical carefar from home

Tours & Transfer NEW!Efficient ground arrangements to maximise youritinerary during business or holiday trips

What do we offer?


Airspace AdvertisingAirAsia’s AirSpace Advertising generates additionalrevenue by giving our advertisers the opportunityto communicate to a captive audience on boardour aircraft

Our extensive list of established brands asadvertisers is proof of campaign effectivenesswhen it comes to reaching a diverse targetaudience. Digi, Mastercard, Citibank, Celcom andTH Properties are just some examples. AirspaceAdvertising will continue to contributesubstantially to our ancillary revenue.

AirSpace encompasses the following media:� Meal tray advertising� Overhead compartment� Auto boarding pass� Flying airboard� Napkins� Beverage cups� Pocket schedule

The AirAsia MagazineTravel 3Sixty – AirAsia's in-flight magazine – waslaunched on 8 August 2007. Two issues havebeen published and and the response has beentremendous. Guests and other readers are drawnto the magazine for its diverse topic coverage ofsubjects from family travel, adventuredestinations and travel tips. With an audience ofover 1.3 million guests on our aircraft everymonth, Travel 3Sixty offers advertisers to tap awide audience across Asia

airasia.comWith over 90 million impressions and 600,000unique visitors every month, airasia.com is by farthe biggest e-commerce merchant in ASEAN.airasia.com is unmatched in terms ofcomprehensive information, content and itsability to cater to six languages covering 11countries. With an extensive reach of frequentguests as well as potential new ones, the websiteis a powerful one-stop integrated travel portal.

AirAsia’s Internet sales have grown from a mere15% from on its first day of operations to animpressive 70% today. As we launch moreinnovative products and services online, our webtraffic will continue to rise. With E-Gift Vouchers,Web check-in, Xpress Boarding and Go-InsureTravel Insurance, we now offer guests anintegrated online experience at airasia.com.



AirAsia has tapped into the passion of sports to conveypowerful marketing values and qualities that reinforce ourimage as a global brand. By being present at the world’sgreatest sporting events, and in association with legendaryteams, AirAsia has pushed its name and appeal to placeswhere it currently does not even fly to yet. Sports andAirAsia’s business philosophies share common values likefocus, passion, quality, determination, drive and excellentteamwork, all of which are the qualities of champions in anyfield.

Matching our highly visible partnership with ManchesterUnited Football Club, now in its third year, AirAsia hasstrategically moved into the high-octane world of F1 racing as‘The Official Airline for AT&T Williams’ F1 Team’. This team is

Champion

the sport’s only independent racing team, mirroring AirAsia’sown independent status as a privately owned airline. AT&TWilliams’ are aristocrats in the sport, having won nine WorldChampionships in the last 30 years. The benefits of thisassociation to AirAsia are obvious, given its following of 600million fans in over 185 countries.

AirAsia has also scored in the English Premier League throughits association with match officials who are ever present inmatches to flash the red AirAsia patch on their sleeves, yet arenot prohibitive in cost. Authority, fairplay andensuring safety are values match officials promote in everymatch, which are also desirable qualities for AirAsia to beassociated with.

of Low Fares

A I R A S I A R O A R S I N T OF O R M U L A O N E

AirAsia sealed 3-year deal as official airline ofAT&T Williams, one of the world’s

leading Formula One (F1) teams

About AT&T WilliamsAT&T Williams F1, formed in 1977, is recognised as one of the most enduring and successfulFormula One racing teams. Of the 16 FIA World Championships won, 9 have beenConstructors’ Championships and 7 Drivers’ Championship. Some legendary Williams F1drivers include Nigel Mansell, Alain Prost, Damon Hill and the late Ayrton Senna.

Sir Frank Williams, the co-owner, is widely regarded as one of the greatest names in motorsports. His success with AT&T Williams F1 earned him a knighthood and the Legiond'Honneur. Based in Grove, Oxfordshire, AT&T Williams currently has 500 employees whoseonly focus is to pursue racing glory. They are the only independent Formula One team flyingthe flag for true racing enthusiasts.

AirAsia engineers from Malaysia, Indonesia and Thailand worked with AT&T Williams,

gaining insights into engineering and racing technology that could lead to innovations for

our airline’s own benefit.

Their stint at William’s F1 factory with some of the team’s top engineers was aimed at discussing and sharing

information about the Formula One technology, including:

� Similarities and differences between aviation and Formula One’s racing machines including the use of

composite material, the importance of aerodynamics and weight

� Key points about aerodynamics and how Formula One leads the way in making cars lighter and faster

� Reduction in the weight of vehicles with carbon fibre technologies thus reducing fuel consumption

Through this program, we aim to embrace some of Formula One’s advanced technologies and also share

aviation knowledge. Particular emphasis has been placed on learning how to make transport more

environmentally friendly in terms of fuel consumption, emissions and noise, while still responding to today’s

global economic need for transport.

This cross-learning attachment is in line with our rationale in sponsoring the AT&T Williams F1 team where we

associate our AirAsia brand with Formula One. As we share the same values as Williams F1, namely quality of

product, technological precision, world class performance and efficiency, this pro-active learning session gave

us the opportunity to heighten our understanding of the teamwork and dedication behind Formula One racing.


Wat Phra Kaew– Temple of the Emerald Buddha, Bangkok

Our holiday packages to

Thailand are increasingly

popular among our guests

given the country’s irresistible

combination of breathtaking

natural beauty, inspiring

temples, renowned hospitality,

popular beach resorts and

mouth-watering cuisine.

thailand

O N E A I R A S I A

This means regardless of our different cultures andnationalities, we all ascribe to the same values andpractices where each of us strives to provide ourguests, shareholders and colleagues with a servicethat is uniquely AirAsia throughout the region.

AirAsia’s Corporate Culture unit was established forthis very purpose. It plays a pivotal role ininstilling the Company’s values and practices, aswell as fostering cross-cultural understanding andappreciation. AirAsia’s approach is to simplifypractices, promote a cost efficient environment,and produce high quality products and serviceswith the underlying focus on safety first andsafety always.

We believe that the success of AirAsia is a resultof togetherness. Hence, through the implementationof specially customised programmes likeemployee orientation, ‘’AirAsia UNITED’ teambuilding and regular visits to all our stations, ourcompany vision, values, and latest happenings areshared with each employee. Everyone has theopportunity to meet other employees fromdifferent departments and different countries forthe purpose of sharing their experiences,exchanging ideas, and ultimately achieving thevaluable bond that reflects our simple philosophy– ONE AirAsia.


Our people are our greatest asset. They make all the difference in the world.

Our driving force has always been our people. From our humblebeginnings to the present family size of 5,000 people, we stand unitedand share one common culture;


AirAsia believes in meand it makes all the difference.

ISWARA KAMALESWARANSARVESWARANCall Centre Operator-turned-Manager, Network Management Centre

FIRST OFFICER, ONG SOOK MINCabin Crew-turned-Pilot

At AirAsia, I get to bewhoever I want to be.

AirAsia recognisesthe potential in you.

NORASHIKIN ONN, Co-Pilot.Nominated as one of the finalists by Malaysian

Women’s Weekly Great Women of Our Time award.

O U R P E O P L E , O U R P R I D E

A career at AirAsia is anempowering experienceas our people find withinthemselves newambitions and strengthto pursue their dreams.We are an enthusiasticpartner in this self-discovery and personalgrowth, nurturing theirtalents and helping themcontribute meaningfullyto the airline’s success.

It was only natural that their achievements wererecognised:

Believe the Unbelievable,Dream the Impossible,Don’t take NO for an Answer!TONY FERNANDES


People management is a strategic priority for AirAsia, especially at a time when theCompany is rapidly evolving and expanding horizons. The Company needs to havethe right people with the right competencies, in the right position to lead theCompany through this aggressive growth phase.

Securing and Developing Human CapitalAirAsia and the businesses we have invested in arededicated to hiring and maintaining a workforce of well-trained, reliable and safety-focused employees at all levels oftheir organisations.

In addition to corporate programs for existing employees,an active recruitment programme is in place to attract andretain qualified individuals from all trades and professions. AtAirAsia we believe that investing in people ultimately bringsthe greatest returns.

Performance Management SystemGiven the insatiable demand for quality human capital,AirAsia’s People Department has devised an annualperformance review process. This process involves all our5,000 plus employees across the Group to be reviewed eachyear. The process includes appraisal talks between themanagers and their employees. The approach allows AirAsiato continually assess that its talent pool matches theCompany’s strategic challenges.

Active leadership development, international careeropportunities and a results oriented corporate culture arevital for successful development of human resources withinthe Company. This performance management system, whichcomprises processes and tools for attracting, developingand securing access to future leaders, plays a central role.

In addition, managers at AirAsia go through different levelsof leadership training. These courses, which foster acommon approach to business and leadership, are intendedto take AirAsia forward and improve overall business resultsthrough accelerated development of managerial leadershipcapabilities of managers.

Internal RecruitmentAirAsia continued to recruit the overwhelming majority ofits talent internally. With over 5,000 employees across elevencountries, AirAsia is blessed with a multi-pool talent and ourPeople Department is entrusted with the duty to identifyand propel these talents to greater heights. The primarygoal is to increase the number of young potentials in theGroup and to develop the AirAsia employer brand.

Injecting New SkillsIn the transition towards becoming a more consumerinsight-driven Company, AirAsia saw the need to injectexternal competencies and skills, particularly in areas suchas Marketing, Product Development and technicalconsultants. Over time, we believe the PerformanceManagement process will contribute reinforcing and honingthese necessary skills within the Company.

DiversityWith market presence in eleven countries, AirAsia is a globalbrand and the management recognises the importance ofhaving a diverse workforce to better serve a wide range ofmarkets and consumers. Driving greater cultural and genderdiversity has been an added benefit of AirAsia brandpenetration to regions where AirAsia previously had noexposure.

I N V E S T I N G I N O U R F U T U R E


24 Augus 2007

2 August 2007

15 August 2007 4 August 2007

16 July 2007 11 July 2007

M A J O R M I L E S T O N E S

Year 2007

7 September 2007AirAsia was recognised for its human capital development,Awarded the 2007 Frost & Sullivan Industrial Technologiesawards.

31 August 2007AirAsia signed a letter of intent with Vietnam shipbuildingindustry group (Vinashin) for a new budget airline inVietnam.

30 August 2007AirAsia completed a record year: Annual revenue increasedby 52%, pretax profit soared to RM278 million with EBITDARmargins of 31%.

28 August 2007Iskandariah Development Region gets a boost from AirAsiawith enhanced connectivity. AirAsia celebrated its firstAirbus in Johor base with flights to Macau and Palembang.

24 August 2007AirAsia’s sponsored the Road Flyers-Merdeka MillenniumEndurance Race 2007 supporting local motorsport racingtalents.

15 August 2007AirAsia's In-flight magazine launched...Travel 3Sixty.

4 August 2007Enchanced facilities for greater mobilityAirAsia improved amenities for the comfort of its disabledguests.

2 August 2007AirAsia announced sponsorship of English Premier LeagueReferees.

30 July 2007AirAsia bagged the 2007 Asia's Best Low-Cost Airline awardby Skytrax.

20 July 2007AirAsia and FlyAsianXpress (now known as AirAsia X) signthe Brand License Agreement.

16 July 2007Inaugural KUALA LUMPUR – SHENZHEN flight!

11 July 2007Citibank and AirAsia tie the knot! Citibank AirAsiaco-branded credit card was launched.

5 July 2007AirAsia is the only airline to serve direct flights to Krabifrom KL.

18 June 2007AirAsia's Mega Sales is back with up to 90% discounts!Unbeatable low fare reductions for domestic andinternational routes.

6 June 2007AirAsia signed a cargo service agreement with Leisure CargoGmbH.

30 May 2007AirAsia celebrated Malaysia's 50 birthday with Amazing LowFares.


29 December 2006

5 April 2007 8 January 200711 May 2007

25 May 2007AirAsia added its 6th daily direct flight to Langkawi9,000 Seats Up For Grabs With Fares From RM1.99.

11 May 2007AirAsia introduced Xpress Boarding,Be Among The First To Choose Your Seat.

12 April 2007AirAsia opened a sales office in Penang.

5 April 2007AirAsia is an official sponsor of the AT&T Williams Formula 1team.

9 March 2007AirAsia carried its first million passengers to Macau!Launched flight to Macau from Kota Kinabalu.

6 March 2007AirAsia celebrated its 30 Million guests flown by offering500,000 seats for fares as low as RM0.30.

7 February 2007AirAsia introduced direct flights to Penang from EastMalaysia hubs.

31 January 2007AirAsia teams up with Microsoft Windows Vista.

18 January 2007AirAsia launched new flights from East Malaysia hubs.

9 January 2007AirAsia launched a regional marketing campaign and offered1,000,000 free seats.

8 January 2007AirAsia received the regional Brand Laureate award.

8 January 2007AirAsia acquired 100 more Airbus A320 aircraft.

Year 2006

29 December 2006AirAsia received its 16th Airbus A320 in Toulouse, France andtook 5 lucky Malaysians to view the ceremony.

December 2006AirAsia selected CFM56-5B to power its 40 firm and30 options Airbus A320 in a $500 million engine order.

30 October 2006AirAsia launched new services to serve Palembang.

4 October 2006AirAsia's launched its first service to Vietnam by using theRed Devil plane and landed in Hanoi.

8 September 2006AirAsia and Manchester United extended partnership withnew sponsor, Tourism Malaysia.


The Kota Kinabalu LCCT was built in response to the stronggrowth of our Kota Kinabalu sector. Kota Kinabalu hasemerged as one of our most popular destinations with 27daily flights to 10 destinations across three countries. KotaKinabalu is now our most important aviation hub in EastMalaysia, ideally situated to capture growth from thePhilippines and China. Currently, Kota Kinabalu houses threeaircraft and will be supported with the introduction of newroutes and increased flight frequency.

The facility was designed to handle 3 million passengers peryear; this is a six-fold increase in capacity from the originalinfrastructure. There are a total of six parking bays and 26check-in counters.

Service Enhancements with Lower CostThe LCCTs of Kuala Lumpur and Kota Kinabalu providenumerous cost saving opportunities. In addition, it has alsoenhanced customer service delivery and reduced boardingrelated delays. Among the major cost saving contributionsfrom the LCCTs are:-

� Lower Passenger Service Charges (PSC).The Government has approved a lower PSC forpassengers using the LCCT. We believe this is a majorimpetus for travel as the savings enjoyed by our guestswill only lure them to fly more often and attract firsttime fliers.

� Lower manpower requirements. The ergonomicdesign facilitates fewer staff for the same job. There isno duplication of duties for our staff multi task moreefficiency.

� Higher efficiency. The simple and compact design ofthe LCCT facilitates our operations and enhancescustomer service delivery.

S E R V I N G Y O U B E T T E R

from our 2nd LCC Terminal at Kota Kinabalu

In a little less than a year of the launch of the first Kuala Lumpur low costterminal (LCCT) – also Asia’s first LCCT, Malaysia now has a second LCCTbased in Kota Kinabalu. Kota Kinabalu Terminal 2 was retrofitted and officiallylaunched as the Kota Kinabalu LCCT on 14 February 2007.


AWA R D S & A C C O L A D E S

� AirAsia received the Minister’s Award at the Malaysia Tourism Awards 2005/2006.

� AirAsia was voted as Asia’s Best Budget Airline by SmartTravelAsia.com underthe Best In Travel Poll 2007.

� AirAsia was awarded the Airline Human Capital Development StrategyAward for the Asian Commercial Pilot Training Market by Frost & Sullivan.

� AirAsia was ranked as one of Asia's Best Emerging Companies with regards toCorporate Governance by The Asset.

� AirAsia was awarded as the “Best Low Cost Airline in Asia” by Skytrax Research ofLondon.

� AirAsia, Asia’s leading low fare airline has bagged yet another prestigious award, “TheBrand Laureate 2006-07 for brand excellence in the Airlines-Low Cost CarrierCategory” at the inaugural Brand Laureate Awards by Asia Pacific Brands Foundation (APBF).

� Tony Fernandes was named the Malaysian Ernst & Young Entrepreneur Of The Year 2006and the Master Entrepreneur Of The Year.

� ‘The Brand Laureate’ Brand Personality will be awarded to Tony Fernandes for his exemplaryperformance, dedication and contribution towards the aviation industry in Malaysia.

� A total of four categories including Best Managed Company, Best Corporate Governance,Best Investor Relations, and Most Committed to Strong Dividend Policy under The AnnualInvestor Poll of FinanceAsia.com.

� Asia’s Best Budget Airline by SmartTravelAsia.com under the Best In Travel 2006 list.

The Asean leader in affordable asian travel and anaward-winning low cost carrier.

2007

2006

24 July 2007AirAsia, through its collaboration with AT&T Williams, has inspired racingprodigy Jazeman Jaafar by sponsoring a visit to the headquarters of theWilliams F1 team in UK. During the visit, Jazeman underwent asimulator test in the team’s state of the art Formula 1 simulator. Thiseffort is to support emerging Malaysian sporting talents and encouragesour sportsman to compete with the very best in the world.

We are driven to empower people to get more out of life,just as we have facilitated air travel for everyone andexpanded their physical boundaries and imaginations.

Annual investments in human capital development, sportingevents, social events and education are the keys that helpindividuals and communities to achieve their hopes anddreams.

Care for the EnvironmentAirAsia’s environmental strategies are based on investmentsin technology and process efficiency enhancements. Wework continuously to reduce consumption of energy and

People matter. Whether they are our guests, staff or communities in countries thatwe serve, AirAsia is committed to enriching lives in a variety of ways.

resources in all aspects of our operations. In addition, highutilisation of resources is enforced to minimise wastages.

One of the Group’s objectives is to accelerate thereplacement of our Boeing 737-300 aircraft. Due to longasset lifecycles, there is a gap between the energy efficiencyof the various aircraft in our fleet. The Airbus A320 aircraft isrenowned as the most fuel efficient, low emission and quietaircraft in its class. The Airbus A320 aircraft typicallyconsumes 15% less fuel and releases 20% less harmfulemissions on a per seat basis compared to the Boeing737-300.

A I R A S I A C A R E S

2 March 2007

AirAsia Academy staff helped fulfill the wish list of Angels’ Children

Home in Overseas Union Garden, Kuala Lumpur. In the giving

spirit of the Chinese New Year, they came with gifts and new

clothes for the children, spending an entire day with them. Our

staff talked about the airline industry and what it takes to become

a pilot, among other airline occupations. Our hope is to spark

interest and excitement for young children to map out their

future, hopefully in the airline industry.



4 August 2007

AirAsia has stepped up efforts to upgrade facilities at the low cost terminals in order to accommodate passengers withlimited mobility. Taking into consideration the plight highlighted by Barrier-Free Environment and Accessible Transport group(BEAT), AirAsia has acquired two Ambulifts, one for each of our hubs in Kuala Lumpur and Kota Kinabalu respectively. TheseAmbulifts are a convenient automobiles that ease the movement of transporting disabled passengers from the terminalbuilding to the aircraft and vice-versa.

In addition, we have also recruited members of BEAT to join our call centre team.

28 August 2007

On their day off, AirAsia’s Penang staff participated ina blood donation campaign in conjunction with thenation’s 50th Merdeka celebrations.

AirAsia took the move to support and moved to develop young local talents in

the Malaysian motorsports racing arena to further excel in the sport by sponsoring

the Hong Leong–Kencana Racing Team in the 2007 edition of the Merdeka

Millennium Endurance Race 2007 (MMER). AirAsia has been a consistent

supporter in the of motor racing. We have also been supporting one of our own

pilots, Muzammil Mohamad, who is participatinges in this race with his team every

year.

24 August 2007

Tanah Lot, Bali

Guests to the world’s largest

archipelago, consider

Indonesia a haven for

adventure and eco-travel due

to the islands’ stunning variety

of topographies and ecologies,

mist-shrouded volcanoes and

mountains, unexplored rain

forests, thousands of miles of

beaches, and endless offshore

reefs that support an

abundance of wildlife.

indonesia


A I R A S I A G R O U P as at 24 September 2007

AIRASIA BERHAD284669-W

100%100%

AIRSPACECOMMUNICATIONS

SDN BHD

AIRASIA(HONG KONG) LTD

AIRASIAPTE LTD

PT INDONESIAAIRASIA

AA CAPITAL LTD

AIRASIA(MAURITIUS) LTD

CRUNCHTIMECULINARY

SERVICES SDN BHD

AIRASIA GO HOLIDAYSDN BHD100%

AA INTERNATIONALLTD

100%

AIRASIA (B) SDN BHD

100%

100% 49% 49% 100%

100%

AIRASIAPHILIPPINES INC

39.9%

AIRASIAGO HOLIDAY

CO., LTD

49% 49%

THAI AIRASIACO. LTD

THAI CRUNCH TIMECO. LTD

THAI AIRASIAHONG KONG LTD

100% 51% 49%


C O R P O R AT E I N F O R M AT I O N

BOARD OF DIRECTORS

Dato' Pahamin Ab. RajabNon-Executive Chairman

Dato’ Anthony Francis FernandesGroup Chief Executive Officer

Dato’ Kamarudin bin MeranunDeputy Group Chief Executive Officer

Abdel Aziz @Abdul Aziz bin Abu BakarNon-Executive Director

Conor Mc CarthyNon-Executive Director

Tan Sri Dato’ (Dr.) R.V. NavaratnamIndependent Non-Executive Director

Dato’ Leong Sonny@ Leong Khee SeongIndependent Non-Executive Director

Fam Lee EeIndependent Non-Executive Director

Datuk Alias bin AliIndependent Non-Executive Director

Dato’ Mohamed Khadarbin MericanIndependent Non-Executive Director

AUDIT COMMITTEE

Dato’ Leong Sonny@ Leong Khee SeongFam Lee EeDatuk Alias bin AliDato’ Mohamed Khadar bin Merican

REMUNERATION COMMITTEE

Tan Sri Dato’ (Dr.) R.V. NavaratnamDato’ Leong Sonny@ Leong Khee SeongDatuk Alias bin Ali

NOMINATION COMMITTEE

Dato' Pahamin Ab. RajabTan Sri Dato’ (Dr.) R.V. NavaratnamFam Lee EeDatuk Alias bin Ali

OPERATIONS SAFETY COMMITTEE

Conor Mc CarthyAbdel Aziz @Abdul Aziz bin Abu Bakar

COMPANY SECRETARY

Jasmindar Kaur A/P Sarban Singh(Maicsa 7002687)

AUDITORS

PricewaterhouseCoopers11th Floor, Wisma Sime DarbyJalan Raja Laut50350 Kuala LumpurMalaysiaTel : (603) 2693 1077Fax : (603) 2693 0997

REGISTERED OFFICE

AirAsia Berhad(Company No. 284669-W)25-5, Block H, Jalan PJU 1/37Dataran Prima47301 Petaling JayaSelangor Darul EhsanMalaysiaTel : (603) 78809318Fax : (603) 78806318E-mail : [email protected] : www.airasia.com

SHARE REGISTRAR

Symphony Share Registrars Sdn BhdLevel 26, Menara Multi-PurposeCapital SquareNo. 8, Jalan Munshi Abdullah50100 Kuala LumpurMalaysiaTel : (603) 2721 2222Fax : (603) 2721 2530/1

SOLICITORS

Messrs Logan Sabapathy & Co.

PRINCIPAL BANKERS

CIMB Bank BerhadCitibank BerhadMalayan Banking BerhadStandard Chartered Bank MalaysiaBerhad

CORPORATE BROKER

ECM Libra Berhad

CORPORATE ADVISOR

Credit Suisse

STOCK EXCHANGE LISTING

Main Board of Bursa MalaysiaSecurities Berhad (“Bursa Malaysia”)

(Listed since 22 November 2004)(Stock code: 5099)


Dato' PahaminAb. Rajab

Abdel Aziz @ AbdulAziz bin Abu Bakar

Dato' TonyFernandes

Dato’ Kamarudinbin Meranun

Conor Mc Carthy

B O A R D O F D I R E C T O R S


Tan Sri Dato' (Dr.)R.V. Navaratnam

Dato’ LeongSonny @ LeongKhee Seong

Datuk Alias bin Ali

Fam Lee Ee

Dato’ Mohamed Khadarbin Merican


DATO' PAHAMIN AB. RAJAB,Malaysian, aged 61, an Advocate andSolicitor of the High Court of Malaya,was appointed Non-ExecutiveChairman of the Company on14 December 2001. He is also theChairman of the NominationCommittee and a member of theExecutive Committee of the Board. Priorto joining the Company, he worked inseveral ministries and governmentagencies in Malaysia over a 30-yearperiod and held various key positions,including as Director General of RoadTransport Department at the Ministryof Transport from 1974 to 1998,Secretary-General of the Ministry ofDomestic Trade and Consumer Affairsfrom 1998 to 2001 and Chairman ofthe Patent Board and the Controller ofCopyright from 1998 to 2001. He isrecognised internationally as an expertin intellectual property laws by theWorld Intellectual Property Organisationand, in 2000, was awarded theprestigious Cyber ChampionInternational Award by the BusinessSoftware Alliance in Washington. Hereceived a B.A. degree in History fromthe University of Malaya in 1970, apostgraduate Diploma in Shariah Lawand Practice from the InternationalIslamic University, Malaysia in 1991, alaw degree (LL.B) from the University ofLondon in 1990, and a Masters of Arts(Public Policy and Administration),majoring in Economic Development,from the University of Wisconsin in1978. He is also the Chairman of SEGInternational Berhad and LNGResources Berhad.

DATO’ ANTHONY FRANCISFERNANDES (DATO’ TONYFERNANDES), Malaysian, aged 43, wasappointed Group Chief ExecutiveOfficer of the Company in December2001. He is also a member of theExecutive and Employee Share OptionScheme Committees of the Board.During the year he also served asmember of the Audit Committee forthe period to 14 May 2007 to 10September, 2007. Prior to joining theCompany, he was Financial Controllerat Virgin Communications London from1987 to 1989, Senior Financial Analystat Warner Music International Londonfrom 1989 to 1992, Managing Directorat Warner Music Malaysia, from 1992 to1996, Regional Managing Director,ASEAN from August 1996 to December1999 and Vice President, ASEAN fromDecember 1999 to July 2001 at WarnerMusic South East Asia. He was activelyinvolved in developing the Malaysianmusic industry and received the title“Setia Mahkota Selangor” from SeriPaduka Baginda Yang DiPertuan Agong,Sultan Salahuddin Abdul Aziz Shah in1999 in recognition of his contributionsand was also the recipient of the“Recording Industry Person of the Year1997” by the Recording IndustryAssociation of Malaysia. In addition, hereceived the International HeraldTribune award for the Visionaries &Leadership Series in 2003 for hisoutstanding achievement with AirAsia,

and was named "Malaysia CEO of theYear 2003" by American Express andthe Business Times. He was named the“Emerging Entrepreneur of the Year –Malaysia 2003” at the Ernst & YoungEntrepreneur of the Year Awards in2004 and was one of Business Week’s25 Stars of Asia for 2004. He wasawarded the “Airline Business StrategyAward 2005 and Low Cost Leadership”by Airline Business and he was alsonamed Asia Pacific Aviation Executiveby the Centre for Asia Pacific Aviation(“CAPA”) for the year 2004 and 2005. InJuly 2005, he was conferred the DarjahDatuk Paduka Tuanku Ja’afar (DPTJ)which carries the title Dato’ by theNegeri Sembilan’s Yang DiPertuan BesarTuanku Ja’afar Tuanku Abdul Rahman inconjunction with His Majesty’s 83rdbirthday celebrations in recognition ofhis services rendered to the bettermentof the nation and community. In 2006,he was named the Master Entrepreneurof the Ernst & Young Entrepreneur ofthe Year 2006 Malaysia. He also bagged‘The Brand Laureate’ Brand Personalityfor his exemplary performance,dedication and contribution towardsthe aviation industry in Malaysia in thesame year. He was admitted as anAssociate Member of the Association ofChartered Certified Accountants in1991 and became a Fellow Member in1996.

D I R E C T O R S ’ P R O F I L E

DATO’ ANTHONYFRANCIS FERNANDES

DATO' PAHAMIN AB. RAJAB


DATO’ KAMARUDIN BIN MERANUN,Malaysian, aged 45, was appointedDirector of the Company on12 December 2001. In January 2004, hewas appointed Executive Director andon 8 December 2005, he wasredesignated to Group Deputy ChiefExecutive Officer. He is also theChairman of the Employee ShareOption Scheme Committee and amember of the Executive Committee ofthe Board. Prior to joining theCompany, he worked in Arab-MalaysianMerchant Bank from 1988 to 1993 as aPortfolio Manager, managing bothinstitutional and high net-worthindividual clients’ investment funds. In1994, he was appointed ExecutiveDirector of Innosabah CapitalManagement Sdn Bhd, a subsidiary ofInnosabah Securities Sdn Bhd. Hesubsequently acquired the shares of itsjoint venture partner of InnosabahCapital Management Sdn Bhd, whichwas later renamed Intrinsic CapitalManagement Sdn Bhd. He received aDiploma in Actuarial Science fromUniversity Technology MARA (UiTM)and was named the “Best ActuarialStudent” by the Life Insurance Instituteof Malaysia in 1983. He received a B.Sc.degree with Distinction (Magna CumLaude) majoring in Finance in 1986,and an MBA in 1987 from CentralMichigan University.

ABDEL AZIZ @ ABDUL AZIZ BINABU BAKAR, Malaysian, aged 54, wasappointed as Non-Executive Director ofthe Company on 20 April 2005. He is amember of the Operational SafetyCommittee of the Board. Prior to this,he served as an Alternate Director ofthe Company to Dato' Pahamin Ab.Rajab since 11 October 2004. He alsoserved earlier as a Director of theCompany from 12 December 2001 to11 October 2004. He is currently theExecutive Chairman of VDSL NetworkSdn Bhd. He is also the Chairman ofPAIMM (Academy of Malaysian MusicIndustry Association) and PRISM(Performance and Artists RightsMalaysia Sdn. Bhd.), a music performerscollection body. From 1981 to 1983 hewas Executive Director of Showmasters(M) Sdn Bhd, an artiste managementand concert promotion company. Hesubsequently joined BMG Music andwas General Manager from 1989 to1997 and, Managing Director from 1997to 1999. He received a Diploma inAgriculture from Universiti PertanianMalaysia in 1975, his BSc in AgricultureBusiness from Louisiana StateUniversity, USA in 1978, and an MBAfrom the University of Dallas, USA in1980.

CONOR Mc CARTHY, Irish, aged 45,was appointed Non-Executive Directorof the Company on 21 June 2004. Heheads the Operational SafetyCommittee of the Board. He isManaging Director of PlaneConsult, aleading aviation business solutionsprovider which he set up in 2000which specialises in advising andestablishing Low Cost Carriers Prior toestablishing PlaneConsult, Conor wasthe Director of Group Operations atRyanair from 1996 to 2000. Beforejoining Ryanair, he was the CEO of AerLingus Commuter. Prior to that, he wasGeneral Manager/SVP for Aer Lingus inthe Marketing and Strategic Planningdivisions. He spent 18 years with AerLingus in all areas of the airlinebusiness from Engineering, Operationsand Maintenance to CommercialPlanning, Marketing and RouteEconomics to Finance, StrategicManagement, Fleet Planning andGeneral Management. He is a qualifiedAvionics Engineer and holds a FirstClass Honours degree in Engineeringfrom Trinity College Dublin.

CONOR Mc CARTHY

ABDEL AZIZ @ ABDULAZIZ BIN ABU BAKAR

DATO’ KAMARUDIN BIN MERANUN


TAN SRI DATO’ (DR.) R.V.NAVARATNAM, Malaysian, aged 72,was appointed as Independent Non-Executive Director of the Company onOctober 8, 2004. He is also theChairman of the RemunerationCommittee and a member of theNomination Committee of the Board.He has held various senior positionswith the Ministry of Finance (lastposition held: Deputy Secretary-General) and retired as Secretary-General with the Ministry of Transport(1986-1989). He was also an AlternateExecutive Director of the World Bank,Washington D.C. (1971-1972), the firstGovernment representative on theExecutive Committee of Bursa MalaysiaSecurities Berhad (formerly known asMalaysia Securities Exchange Berhad)(1985), Chairman of the ASEANCommittee on Transportation andCommunication (1986-1989), a Memberof the National Development PlanningCommittee (1989) and a Member ofthe Securities Commission. Afterleaving the public service, he joinedBank Buruh (M) Bhd as Chief ExecutiveOfficer and served for 5 years (1989-1994). He was Vice Chairman of theMalaysian Business Council, is amember of the Malaysian ExternalTrade Development Corporation(MATRADE), Director of the MalaysianIndustry-Government Group for HighTechnology (MIGHT) and appointedmember of the National Economic

Consultative Council (MAPEN II) inAugust 1999. He is presently amember of the Court of Fellows andCouncil of the Malaysian Institute ofManagement and Deputy President ofthe Institute of ManagementConsultants. He was Vice President ofthe Malaysian Economic Associationand the Vice President of the HarvardClub. Tan Sri attained a Bachelor of Arts(Honours) Econs from University ofMalaya in Singapore in 1959, Diplomafrom Royal Institute of PublicAdministration in London in 1963 and aMasters in Public Administration (Econs)from Harvard University, USA in 1969.He was awarded an HonoraryDoctorate of Laws by the OxfordBrookes University (UK) in 2000. Hecurrently holds directorship positions atthe Monash University, the AsianStrategy and Leadership Institute,Sunway Construction Bhd. and SunwayInternational Vacation Club Berhad. Heis also Corporate Adviser of the SunwayGroup and Deputy Chairman ofSunway College.

DATO’ LEONG SONNY @ LEONGKHEE SEONG, Malaysian, aged 68, wasappointed Independent Non-ExecutiveDirector of the Company on 8 October2004. He is Chairman of the AuditCommittee and a member of theRemuneration Committee of the Board.He was Deputy Minister of PrimaryIndustries from 1974 to 1978, Ministerof Primary Industries from 1978 to 1986and a Member of Parliament from 1974to 1990. Prior to this, he was asubstantial shareholder of his family’sprivate limited companies, which wereprincipally involved in general trading.He was the Chairman of the GeneralAgreement on Tariffs and Trade’sNegotiating Committee on TropicalProducts (1986 to 1990) and was theChairman of the Group of 14 on ASEANEconomic Cooperation and Integration(1986 to 1987). He graduated with adegree in Chemical Engineering in1964 from University of New SouthWales, Australia. He is an ExecutiveChairman of Nanyang Press HoldingsBerhad and IndependentNon-Executive Director of TSHResources Berhad.

DATO’ LEONG SONNY@ LEONG KHEE SEONG

TAN SRI DATO’ (DR.)R.V. NAVARATNAM


FAM LEE EE, Malaysian, aged 46, wasappointed Independent Non-ExecutiveDirector of the Company on 8 October2004. He is also a member of the Auditand Nomination Committees of theBoard. He received his BA(Hons) fromthe University of Malaya in 1986 and anLLB (Hons) from the University ofLiverpool, England in 1989. Heobtained his Certificate of LegalPractice in 1990 and has beenpractising law since 1991 and currentlyis the senior partner at Messrs. YFChun, Fam & Yeo. He also serves as aDirector of M-Mode Berhad.

DATUK ALIAS BIN ALI, Malaysian,aged 59, was appointed IndependentNon-Executive Director of the Companyon 23 September 2005. He is also amember of the Audit, Remunerationand Nomination Committees of theBoard. Prior to this, he had a long anddistinguished career with theGovernment which began soon afterhis graduation from the University ofMalaya in 1970. He started as anAdministration Trainee Officer in theStatistics Department. He subsequentlyjoined the Prime Minister’s Departmentas Administration Development Officer.Whilst still with the department, hecompleted his Master in BusinessManagement and assumed theposition of Head of Department(Consultancy) at the National Instituteof Public Administration (INTAN) in1975. Over the next 15 years with theGovernment, he held various seniorpositions in several Ministries and

Department including as DeputyDirector of Training (Operations) in thePublic Services Department, UnderSecretary (Establishment and Services)in the Ministry of Works and Director ofIndustrial Development Division in theMinistry of Trade and Industry. Hemoved back to the Prime Minister’sDepartment in 1990 as Cabinet UnderSecretary. In June 2000, he wasappointed Secretary General of theMinistry of Health, a post he held untilhis retirement in March 2004. Hereceived a Master in BusinessManagement from the Asian Instituteof Management, Philippines in 1975and a Bachelor of Economics (Honours)from the University of Malaya in 1970.He is also presently a Director ofIntegrated Rubber Corporation Berhad,FIMA Corporation Berhad, MentakabRubber Company Berhad, CCMDuopharma Biotech Bhd. and MelatiEhsan Holdings Bhd.

DATO’ MOHAMED KHADAR BINMERICAN, Malaysian, aged 51, wasappointed Independent Non-ExecutiveDirector of the Company on 10

September 2007. He is also a memberof the Audit Committee of the Board.He has had more than 20 years’experience in financial and generalmanagement. He has been an auditorand a management consultant with aninternational accounting firm, beforejoining a financial services group in1986. Between 1988 and April, 2003,Dato’ Khadar held several seniormanagement positions in PernasInternational Holdings Berhad (nowknown as Tradewinds CorporationBerhad), a company listed on the MainBoard of Bursa Malaysia SecuritiesBerhad, including as President andChief Operating Officer. He was the firstPresident of the Malaysian Associationof Hotel Owners. He currently manageshis own financial consultancy practice.He is a member of both the Institute ofChartered Accountants in England andWales and the Malaysian Institute ofAccountants. He is also presently aDirector of RHB Bank Berhad, RHBInvestment Bank Berhad (formerlyknown as RHB Sakura MerchantBankers Berhad), RHB Insurance Berhadand ASTRO All Asia Networks PLC.

DATO’ MOHAMEDKHADAR BIN MERICAN

Notes:1. Family Relationship with Director and/or Major Shareholder

None of the Directors has any family relationship with any director and/or major shareholder of AirAsia.

2. Conflict of InterestNone of the Directors has any conflict of interest with AirAsia Group.

3. Conviction for OffencesNone of the Directors has been convicted for offences within the past 10 years other than traffic offences, if any.

4. Attendance of Board MeetingsThe attendance of the Directors at Board of Directors' Meetings is disclosed in the Corporate Governance Statement.

FAM LEE EE

DATUK ALIAS BIN ALI

S E N I O R M A N A G E M E N T

DATO’ TONY FERNANDES

MEGAT KAMARUDDIN MEGAT SHAMSUDDIN

ASHOK KUMARLAU KIN CHOY

JOYCE LAI LIH YIN

DATO’ KAMARUDIN MERANUN

TASSAPON BIJLEVELD

SENDJAJA WIDJAJA


CAPT CHIN NYOK SAN

AZHARI DAHLANBO LINGAM

NASSER KASSIM

CAPTAIN WONG KAM WENG

ROZMAN OMAR

KATHLEEN TAN

CHARLES CJ CHOW

TAN HOCK SOON

CAPTAIN ADRIAN JENKINS

SAIDULKHADRI HAMZAH


Dato’ Tony FernandesGroup Chief Executive Officer

Details of Dato’ Tony Fernandes are disclosed in theDirectors’ Profile on page 56 of this Annual Report.

Dato’ Kamarudin MeranunDeputy Group Chief Executive Officer

Details of Dato’ Kamarudin Meranun are disclosed in theDirectors’ Profile on page 57 of this Annual Report.

Tassapon BijleveldChief Executive Officer, Thai AirAsia

Tassapon joined Thai AirAsia in 2003 as Chief ExecutiveOfficer and is entrusted with the responsibility of overseeingall aspects of the airline’s operations as well as drivinggrowth in Thailand. He received a Bachelor’s degree inMarketing from Assumption University, Thailand and aMaster in International Marketing from Thamsart University,Thailand.

Tassapon has more than 12 years experience in theconsumer products industry, having worked in variouscountries in South East Asia and Indo China for two Fortune500 companies – Adams (Thailand) Co. Ltd (a division ofWarner Lambert) and Monsanto (Thailand) Co. Ltd. Prior tojoining AirAsia he was Managing Director of Warner Music(Thailand) Co. Ltd for 5 years.

Sendjaja WidjajaPresident Director, Indonesia AirAsia

Sendjaja Widjaja has been President Director of IndonesiaAirAsia since November 2004. He also holds directorshippositions in PT Langgeng Gitamusikal, PT PancabibaManunggal since 2001. Prior to joining the Company, hewas President Director of PT Musica Studio’s from 2001 to2004; President Director of Warner Music Indonesia from1997 to 2001; President Director of Hema Gitatama Recordfrom 1994 to 1995 and President Director of PT MusicaStudio’s from 1980 to 1994.

Rozman OmarRegional Head, Finance

Rozman Omar has been the Regional Head for Financesince August 2006. Rozman was part of the keymanagement team that spearheaded the flotation of AirAsiaBerhad on Bursa Malaysia. He was also one of the keypersonnel involved in the formation of AirAsia’s jointventures in Thailand and Indonesia. Upon completion of theCompany’s flotation in November 2004, he was made theCFO of PT Indonesia AirAsia responsible for all the financialand corporate legal aspects of the Company.

Rozman has over 22 years of extensive corporate financeexperience. Upon completion of his ACCA examinations in1984, Rozman joined Arab-Malaysian Merchant Bank Berhadfor six years and rose to the position of Corporate FinanceManager. He then joined Bumiputra Merchant BankersBerhad. Subsequently, he joined Kumpulan Fima Berhad in1992 as Senior Vice President, Corporate Services. He laterreturned to Arab-Malaysian Merchant Bank Berhad asGeneral Manager, Corporate Finance from 1994 to 1996. Hethen became Managing Director of Innosabah CorporateServices Sdn Bhd until 1999 before venturing out withInCAM Consulting Sdn Bhd until 2003.

Kathleen TanRegional Head, Commercial

Kathleen Tan joined AirAsia as Senior Vice-President forGreater China in August 2004. Kathleen was instrumental insecuring AirAsia’s entry to China and launched the first routeto Xiamen, making AirAsia the first low cost carrier tooperate in China. As Head of Commercial, Kathleen isresponsible for driving route revenue, sales and distribution,marketing, brand building and ancillary income within theAirAsia network.

Prior to AirAsia, she was Managing Director of Warner MusicSingapore for 7 years, Chairperson of the Recording IndustryAssociation of Singapore and Regional Marketing Director ofWarner Music Asia Pacific in Hong Kong for 3 years. Duringher six year stint with the FJ Benjamin Group Singapore, shewas involved in brand marketing and the brainchild behindthe success of Guess label in South East Asia as well asoverseeing marketing communications for Gucci, Coach,Fendi and many other labels within the Group. Kathleenstarted her career in the advertising industry, having workedin agencies such as Leo Burnett and Mojo.

S E N I O R M A N A G E M E N T


Captain Chin Nyok SanHead of Business Development

Captain Chin Nyok San was one of the pioneers of AirAsia,then under the DRB HICOM. Captain Chin has over 30 yearsof illustrious career in the airline industry encompassing thewhole aspect of the industry. He is a licensed pilot formultiple types of aircraft, an authorised examiner,training Captain and served as the flight operationsmanager. He obtained his Commercial Pilot’s License in 1976and Airline Transport Pilot’s License in 1985 from theDepartment of Civil Aviation Malaysia. He also obtained anAirline Transport Pilot’s License from the Federal AviationAdministration in 1994.

Captain Chin has been the Head of Business Developmentsince January 2005. He is responsible for the effectiveplanning and business development of the Group’soperations. Captain Chin and his team singlehandedly established Thai-AirAsia and activate its aircraftoperating certificate. In addition, Captain Chin alsoeffectively reactivated Indonesia AirAsia's aircraftoperating certificate and recommenced the business unit.

Charles CJ ChowRegional Head, People

Charles CJ Chow joined AirAsia in 2002. Prior to hisappointment as Regional Head for People Department inOctober 2005, Charles was AirAsia’s Group General Counsel.He brought to the Company the benefit of a wide range ofskills attained from a diverse background that includesexperience in private legal practice, journalism, advertisingand marketing communications, HR consultancy and in-house Legal Counsel to HSBC Hong Kong and IOI CorpBerhad. He has an LLB (Hons) from the National Universityof Singapore and a BA (Hons) from the University of Malaya.He now heads the management of the Group’s humanresources.

Bo LingamRegional Head, Operations

Prior to joining AirAsia, Bo Lingam has worked extensively inthe publication and music industry serving the role asProduction Controller and Promotions Manager at variousproduction houses.

He joined AirAsia in November 2001 as Ground OperationsManager. Prior to his current appointment as Regional Headof Operations, Bo held several other key roles at AirAsiaincluding as Regional Director – Guest Services, SeniorManager – Purchasing & Supplies before he was secondedto Thai AirAsia to oversee and assist in the initial set-up ofThai AirAsia operations in Bangkok.

Ashok KumarRegional Head, Strategic Planning and Airport Policy

Ashok Kumar has been Regional Director, Airport and PublicPolicy of the Company since January 2005. Prior to that,Ashok was Regional Director, Government and BusinessRelations from October 2004. He has had 36 yearsexperience in the airline industry, having worked atMalaysia-Singapore Airlines as Management Trainee/Marketing Executive from 1970 to 1972 and Malaysia Airlinesfrom 1972 to 2003, where he held various key positions,including as Assistant General Manager, OperationsPlanning, before joining the Company in 2003 as SeniorManager, Commercial Planning and Strategy. Ashok receiveda Bachelor of Applied Economics (Hons) from the Universityof Malaya in 1970.

Captain Wong Kam WengRegional Head, Flight Safety

Captain Wong served as Regional Director, Group QualityManagement System until his recent appointment asRegional Head of Flight Safety. Captain Wong joined AirAsiain September 1996, initially as Captain of the Boeing 737and later as Instructor and Examiner. Captain Wong currentlyflies the Airbus 320 and Airbus 330 as Captain, Instructorand Examiner and is a member of AirAsia's aircraftacceptance test team.


Captain Wong started his career in the aviation industrywith Pelangi Air as co-pilot. He was subsequently promotedto Captain and Instructor and later as Fleet Captain of theFokker 50. He has flown various aircraft including the Airbus330, Airbus 320, Boeing 737, Fokker 50, Dornier 228 andTwin Otter DHC6 and has accumulated a total of 13,300flying hours.

Lau Kin ChoyRegional Head, Information Technology

Lau Kin Choy has been Regional Director, InformationTechnology & E-Commerce since July 2004 and waspreviously Chief Information Officer from August 2002. Priorto joining the Company, Lau was the General Manager ofWEB Distribution Services Sdn Bhd, a joint venture musicdistribution and logistic center for Warner Music, EMIMalaysia and BMG Music, where he was responsible for thecompany’s operations, from 1998 to 2002. Lau also workedas IT and Operations Manager at Warner Music Malaysiafrom 1989 to 1997, and IT Operations Officer at OCBC Bankfrom 1981 to 1988. Lau received a Diploma in NCCComputing in 1986 and a City and Guilds Certificate inComputing in 1984.

Joyce Lai Lih YinRegional Head, AirAsia Academy andCorporate Culture

Joyce joined AirAsia in December 2001 as a Senior ManagerMedia. Being the earliest team player in the then twoaircraft airline, she was instrumental in building the AirAsiabrand name and raising its international profile. In July 2004,she was appointed the Regional Director, AirAsia Academyand Corporate Culture, a position she assumed in February2006, she was the Regional Director Corporate Culture &Quality Service since March 2005.

She has extensive marketing experience having previouslyheld various key positions at Warner Music Malaysia from1994 to 2000, including as Group Product Manager andStrategic Marketing Manager. She subsequently joined BMGMusic Malaysia as Senior Marketing Manager in 2000 beforebeing promoted to Marketing Director. Joyce wasresponsible in building and fostering the AirAsia cultureacross the Group. As head of the AirAsia Academy, Joyce isresponsible for overseeing all aspects of the training needsfor the Group’s workforce.

Azhari DahlanRegional Head, Engineering

Azhari Dahlan has been Regional Director of Engineeringsince September 2004 overseeing the Group’s airlineengineering functions in Malaysia, Indonesia and Thailand.Prior to that, Azhari was Manager, Planning and Logisticsfrom 1996 to 2004. He has more than 18 years experience inthe airline industry, 8 of which was with Malaysia Airlines asLicensed Aircraft Engineer from 1987 to 1992, Aircraft CheckForeman from 1992 to 1994 (during which period he wasseconded to China to provide aircraft post check support forChina South West airlines) and Production Inspector from1994 to 1995. From 1995 to 1996, he was with Transmile Airinitially as a Licenses Aircraft Engineer and subsequently, asQuality Assurance Engineer. Azhari is a Licensed AircraftEngineer by profession, and has undergone training atLeonard Isitt Training School, Christchurch, New Zealand andMalaysia Airlines Technical Training School, Subang, Selangor.

Captain Adrian JenkinsRegional Head, Flight Operations

Captain Adrian joined AirAsia in 1996 when the airline wasthen under DRB HICOM. Prior to his appointment asRegional Head for Flight Operations in September 2006, heserved AirAsia in various positions including as Instructorand Company Check Airman, Assistant Chief Pilot – Trainingand Standards and Assistant Chief Pilot – 0perations. He alsohelped in the setting up of Thai AirAsia’s flight operationsand pilot training.

Captain Adrian joined the aviation industry in 1989 as acabin crew with Malaysia Airlines. He left in 1992 toundergo training as a pilot. In 1994, he joined NusantaraSakti, a member of the Renong group, which was involvedin general aviation.


Nasser KassimHead of Cargo

Nasser served as Regional Director, In-flight Services, Charterand Cargo for AirAsia before his streamlining his efforts tothe cargo business unit. His prior appointments at AirAsiainclude that of Country Director of Indonesia AirAsia andExecutive Director, Business Development managingAirAsia’s Haj operations, cargo, charter and Army contracts.Nasser’s contribution to AirAsia’s rapid expansion plansinclude managing routes development, negotiating aircraftleases, developing cargo operations, charter and in-flightservices that encompass food and beverage as well asmerchandising.

Nasser’s expertise in developing regional markets stemsfrom his vast experience gained over an illustrious 18-yearcareer at Warner Music Malaysia Sdn Bhd where he heldvarious key positions including Artist & Repertoire Directorfrom 1985 to 1988 and Executive Director from 1989 to2001. As one of the pioneers in the Malaysian musicindustry, Nasser had managed some of the biggest sellingartists in Malaysia and was responsible for marketing anddeveloping these talents across Asia, where he gainedinvaluable exposure and a better understanding of the Asianmarkets and cultures.

Megat Kamarruddin Megat ShamsuddinHead of Treasury

Megat Kamarruddin, AirAsia’s Executive Vice President,Treasury, has over 20 years of experience gained at variousfinancial institutions in major financial centres globallywhere he held senior positions. He was principallyresponsible for amongst others, trading and investing inforeign exchange, interest rate and fixed income markets.

Prior to joining AirAsia in June 2006, he was Head ofTreasury at Bumiputra Commerce Bank and Head of GlobalSales and Global Funding at Group Treasury, CIMB. Megat isresponsible for group corporate treasury matters, principallymarket interfacing activities which includes though notrestricted to Forex, Investments, Interest rates, Insurance andCommodity Hedging.

Tan Hock SoonHead of Go-Holiday

Tan has been Head of Go-Holiday since April 2006. Sincethen, he has successfully revamped the business model anddeveloped it as the biggest online travel portal in SouthEast Asia. Prior to his current appointment, he was RegionalDirector, Distribution from July 2005 to March 2006 wherehe was instrumental in establishing AirAsia franchise outletsin the distribution channel. A proven sales practitioner, hehas had an impressive career track record. From 1987 to1993 he held various positions at Procter & Gamble (P&G)including as Jobber Distribution Supervisor, Key AccountManager and Section Manager. From 1993 to 1994, he wasArea Sales Manager at Cusson UK International where hewas successful in penetrating key shopping complexes andestablishing good customer relationships. From 1994 to1996, he served as an Assistant Sales Manager and helpedincrease both product distribution and revenue in the EastMalaysia and Southern regions. Prior to joining AirAsia, heserved at Warner Music Malaysia from 1996 to 2005 as aSales Director.

Saidulkhadri HamzahHead of Corporate Quality & Safety

Saidulkhadri has been Head of Corporate Quality & Safetysince April 2007 and was previously the Engineering QualityAssurance Manager from January 2005. Saidulkhadri has28 years of experience in the airline industry, his first stintstarted back in 1979 when he joined Malaysia AirlinesEngineering Apprentice Programme and rise through theranks to become the Quality Assurance Inspector forSystems and Procedures implementation. Saidulkhadri leftMalaysian Airlines in 1995 to join the Malaysian Departmentof Civil Aviation as an assistant director. He was responsiblefor the function of safety oversight and continuingairworthiness, air operators and maintenance repairorganisations.


M A N A G I N G R I S KT O M A X I M I S E R E T U R N S

Airasia is exposed to multiple risks in the course of its daily operations. Limiting andcontrolling risks enable business opportunities to be realised in the interest ofmaximising returns. The Group is exposed to three main types of risks, related toeither business operations, financial operations and regulatory requirements.Operational risks are normally managed by the Group’s operative units, and financialrisks by the Central Treasury Department.

Risk Management PoliciesThe Management has implemented a financial and credit policy for the Group in order to manage and control financialrisks. The above-mentioned risks are, amongst others, managed by the use of derivative financial instruments according tothe limitations stated in the Financial Policy.

Management of financial risks has largely been centralised to Group Treasury at our headquarters in Kuala Lumpur.Monitoring of risk in Group Treasury is performed by a separate risk controlling function on a daily basis.

1. Operational Risks

� Jet Fuel� Revenue assurance

2. Financial Risk

� Foreign exchange� Interest rate fluctuation

3. Other Risks

� Regulatory� Geographical

� Stability of cost structure

� Stability of revenue stream

� Reduces competitive uncertainty

� Enhance accuracy of forward planning strategies

� Successful execution of business growth plans

� Increases business transparency

Benefits of Risk Management


1. Operational Risks

AirAsia is exposed to risks in connection with itsbusiness operations. The ability of AirAsia to increaseprofitability to shareholders is largely dependent onhow well the Group succeeds in maintaining cost-efficient operations. Management of changes in jet fuelprices and aircraft components are also vital factors inachieving and maintaining profitability.

2. Financial Risks

The Group is exposed to a number of risks related toliquid funds, trade receivables, borrowings,commodities and derivative instruments. The Group’sfinancial risks are managed within the framework of thefinancial and credit policies determined by theManagement.

Management of these risks is largely centralised to theGroup’s Treasury Department and is based to a greatextent on financial instruments. The Group employs awide range of financial instruments to manage theserisks.

Approximately 70% of operational cost are USD linked.These includes jet fuel, term loans, depreciation andamortisation, components cost and contracts withaircraft suppliers.

In accordance with the Group’s financial policy tomitigate currency risk, 19 Airbus A320 aircraft termloans are hedged via currency derivative structures. TheGroup will continue to look for opportunities to hedgemore aircraft and to hedge the receivables.

Interest-rate risks

The Group mitigates the fluctuation of interest rates byutilising interest rate swaps. The Group has 60 interestrate swaps available for the aircraft purchase.

3. Other Risks

Regulatory

AirAsia is subject to various regulatory approvals.Changes in the interpretation of current regulations orthe introduction of new laws or regulations will have amaterial adverse impact on the Company.

Geographical

AirAsia is subjected to the risk associated to eachcountry that it serves. This geographical risk exposurewill be reduced as the Group continually expands theroute network and diversifies the revenue stream to awider market.


A I R A S I A F I N A N C I A L S N A P S H O T S

300

250

200

150

100

50

0

30.0

25.0

20.0

15.0

10.0

5.0

0

40.0

30.0

20.0

10.0

003 04 05 06 07

3.5 58

xx

14.8

115

16.0

8.1

86

17.3

278

Profit before Tax &Profit before Tax Margins

3.5

3.0

2.5

2.0

1.5

1.0

003 04 05 06 07

2.90

2.47

2.19

2.95 3.

16

Coat Per ASK

14,000

12,000

10,000

8,000

6,000

4,000

2,000

003 04 05 06 07

1,48

1 2,83

9

6,28

9

9,31

2

13,9

92

Passengers Carriedby AirAsia Group

5.55.04.54.03.53.02.52.01.51.0

003 04 05 06 07

1.1 1.2

5.5

1.8

1.8

Working Capital Ratio

200018001600140012001000

800600400200

003 04 05 06 07

330

393

718

1,07

1

1,60

3

Revenue (RM Million)

Profit before Tax (RM million)Profit before Tax Margins

800

600

400

200

003 04 05 06 07

9529

.7

116

29.6

209

29.1

14.4

154

30.6

490

EBITDAR & EBITDARMargins

EBITDAREBITDAR margins

RMmillion

Margin%

RMmillion

Margin%

Ha Long – Bay of the descending Dragon

Every year, our guests keep

coming back to Vietnam,

mesmerised by the sublime

beauty of the country's

natural settings: the Red River

Delta in the north, the

Mekong Delta in the south

and almost the entire coastal

strip that is a patchwork of

brilliant green rice paddy

fields tended by women in

conical hats.

vietnam


A. Directors

Board Balance and Meetings

The composition of the Board of Directors of AirAsiaBerhad is in compliance with Bursa Malaysia’s ListingRequirements. The Board comprises of a Non-ExecutiveChairman, seven Non-Executive Directors and twoExecutive Directors, details of whom are given onpages 56 to 59. Subsequent to the financial year ended30 June 2007, an additional Non-Executive Director wasappointed to the Board. The roles of Chairman andGroup Chief Executive Officer are separate with a cleardivision of responsibility between them.

The size, balance and composition of the Boardsupports the Board’s role, which is to determine thelong term direction and strategy of the Group, createvalue for shareholders, monitor the achievement of

business objectives, ensure that good corporategovernance is practised and to ensure that the Groupmeets its other responsibilities to its shareholders,guests and other stakeholders. The Board is alsoresponsible for ensuring that appropriate processes arein place in respect of succession planning forappointments to the Board and to senior managementpositions.

The Non-Executive Directors bring wide and variedcommercial experience to Board and Committeedeliberations. The Non-Executive Directors devotesufficient time and attention as necessary in order toperform their duties. Other professional commitmentsof the Non-Executive Directors are provided in theirbiographies on pages 56 to 59. The Board requires thatall Non-Executive Directors are independent incharacter and judgement.

The Board supports the executive management team in delivering sustainable addedvalue for shareholders. The Board considers that it has complied throughout the yearunder review with the principles and best practices as set out in the Malaysian Codeon Corporate Governance. The following sections explain how the Company appliesthe principles and supporting principles of the Malaysian Code on CorporateGovernance.

During the financial year ended 30 June 2007, the Board of Directors held a total of seven (7) meetings and the detailsof Directors’ attendances are set out below:

Name No. of Meetings Attended

Dato’ Pahamin Ab. Rajab 5Dato’ Anthony Francis Fernandes 6Dato’ Kamarudin bin Meranun 7Abdel Aziz @ Abdul Aziz bin Abu Bakar 6John Francis Tierney (resigned on 28 February 2007) 5Conor Mc Carthy 5Tan Sri Dato’ (Dr.) R.V. Navaratnam 5Dato’ Leong Sonny @ Leong Khee Seong 7Fam Lee Ee 5Datuk Alias bin Ali 6

Note: All attendances reflect the number of meetings attended during the Members’ duration of services.

S TAT E M E N T O N

C O R P O R AT E G O R V E R N A N C E


Supply of Information

Seven (7) days prior to the Board Meetings, all Directorswill receive the agenda and a set of Board paperscontaining information for deliberation at the BoardMeetings. Management is required to explain in theevent that the timeline cannot be observed.

As a Group practice, any Director who wishes to seekindependent professional advice in the furtherance ofhis duties may do so at the Group’s expense. Directorshave access to all information and records of the Groupand also the advice and services of the CompanySecretary, who also serve in that capacity in the variousBoard Committees.

Appointments to the Board

The Group has implemented procedures for thenomination and election of Directors via theNomination Committee. Comprising mainly ofindependent Non-Executive Directors, the NominationCommittee is responsible for identifying andrecommending to the Board suitable nominees forappointment to the Board and Board Committees. Onappointment, Directors are provided with informationabout the Group and attend an induction programme.The Company Secretary will ensure that allappointments are properly made, that all informationnecessary is obtained, as well as all legal and regulatoryobligations are met.

Directors Training

During the financial year ended 30 June 2007, allDirectors have attended and completed the MandatoryAccreditation Program as required under the ListingRequirements of Bursa Malaysia.

The Directors are encouraged to attend programmesand seminars whether in-house or external to helpthem in the discharge of their duties and to keepupdated with emerging trends in the industry of LowCost Carriers.

Re-election of Directors

The Articles of Association of the Company providethat at least one-third of the Directors are subject toretirement by rotation at each Annual General Meeting(“AGM”) and that all Directors shall retire once in everythree years, and are eligible to offer themselves for re-election. The Articles of Association also provide that aDirector who is appointed by the Board in the courseof the year shall be subject to re-election at the nextAGM to be held following his appointment. Directorsover seventy years of age are required to submitthemselves for re-appointment annually in accordancewith Section 129(6) of the Companies Act, 1965.

Board Committees

The Audit Committee comprises three Independentand Non-Executive Directors and one ExecutiveDirector. Following the resignation of John FrancisTierney as Non-Executive Director on 28 February 2007from the Board of Directors and the Audit Committee,Dato’ Anthony Francis Fernandes and Datuk Alias bin Aliwere appointed as members of the Audit Committeeon 14 May 2007. Subsequent to the financial yearended 30 June 2007, a Non-Executive Director wasappointed as an additional member and the ExecutiveDirector ceased to be a member of the AuditCommittee.

During the period under review, the Committee heldseven meetings at which there was full attendance bymajority Committee members during their respectiveduration of service. At all meetings the Group ChiefFinancial Officer and internal auditor were inattendance. The Committee also meets with theexternal auditors in private at least twice in the yearunder review.

The Committee reviews all published financialstatements and post audit findings, focusing inparticular on accounting policies, compliance,management judgement and estimates. It alsomonitors the Group’s internal control and riskmanagement framework (including the effectiveness ofthe internal audit function) and financial reporting. Anysignificant findings or identified weaknesses are closelyexamined so that appropriate action can be taken,monitored and reported to the Board.

The Committee meets routinely at least five times ayear with additional meetings held where necessary.The Group Chief Financial Officer, senior managementstaff, the internal and external auditors attend suchmeetings by invitation and provide reports as requiredby the Committee.

The Nomination Committee comprises four Non-Executive Directors, three of whom are independent.The Committee makes recommendations to the Boardon new Board appointments, taking into account thebalance and structure of the Board. Additionally, theCommittee oversees and evaluates the Board’seffectiveness and suggests opportunities forimprovement. The Committee reviews the appropriateskills, experience and characteristics required of Boardand its Committees’ members, considering their currentmakeup. They assess issues such as internationalexperience, independence and skills such asunderstanding of finance, legal and technical issues.The Committee also considers the succession planningframework for the Group and reviews whether they arein order and whether adequate training programmesare being developed to address any competency gaps.During the financial year ended 30 June 2007 theNomination Committee met once, which wereattended by all members.


The Remuneration Committee comprises threeIndependent Non-Executive Directors. The Committeeconsiders the remuneration of Executive Directorswhich is in accordance with the skill, experience andexpertise they possess. The component parts of theremuneration are structured so as to link rewards tothe individual and group performance. Annually theCommittee meets to discuss the Executive Directors’current year performance against the performanceobjectives approved by the Board earlier in the year.The Committee makes the required recommendationto the Board as the Committee is not authorised toimplement its recommendation on behalf of the Board.During the financial year ended 30 June 2007 theRemuneration Committee met once, which wereattended by majority of the members.

The Employee Share Option Scheme (“ESOS”)Committee comprises of the Group Chief ExecutiveOfficer, the Deputy Group Chief Executive Officer, theGroup Chief Financial Officer, the Executive Vice-President, People Department and the Company’sExternal Legal Advisor. The ESOS Committee wasestablished to administer the ESOS of the Group inaccordance with the objectives and regulations thereofand to determine the participation eligibility, optionoffers and share allocations (based on the performance,seniority and number of years of service as well as theemployees actual or potential contribution to theGroup) and to attend to such other matters as may berequired.

The Executive Committee comprises of the Non-Executive Chairman, the Group Chief Executive Officer,the Deputy Group Chief Executive Officer and theGroup Chief Financial Officer. The Legal Counsel of theGroup acts as the secretary to this Committee. Amongothers, the functions of the Executive Committee are,to decide on transactions and matters of the Group’sbusinesses which fall within their levels of authority.This will allow matters that fall within the Committee’slimit or terms of reference to be deliberated anddecided by the Committee, thus reducing the Board’sagenda. Where appropriate, recommendations aremade to the Board on decisions reserved for the Board.

The Operations Safety Committee was established inAugust 2005 with the purpose of providing Board leveloversight and input to the management of Safetywithin AirAsia’s operations. The Board appoints theChairman of the Committee and a meeting is heldeach quarter to review progress and trends in relationto Safety & Security Management, Incident Reports,Investigations and recommendations and Flight Data

Analysis and Recommendations. The Committeecomprises two Non-Executive Directors and the othermembers include relevant operations safety andsecurity specialists from AirAsia and from our affiliatesin Thailand and Indonesia. A report is provided toBoard each Quarter.

B. Directors Remuneration

The remuneration package comprises the followingelements:-

1. Fee

The fees payable to each of the Non-ExecutiveDirectors for their service on the Board arerecommended by the Board for final approval byshareholders of the Company at the AGM.

2. Basic salary

The basic salary for each Executive Director isrecommended by the Remuneration Committeeand approved by the Board, taking into accountthe performance of the individual, the inflationprice index and information from independentsources on the rates of salary for similar positionsin other comparable companies internationally.Salaries are reviewed annually.

3. Bonus scheme

The Group operates a bonus scheme for allemployees, including the Executive Directors. Thecriteria for the scheme are dependent on variousperformance measures of the Group, togetherwith an assessment of each individual’sperformance during the period.

4. Benefits-in-kind

Other customary benefits (such as private medicalcare, car, travel coupons, etc.) are made availableas appropriate.

5. Service contract

Both the Group Chief Executive Officer andDeputy Group Chief Executive Officer, have athree-year service contract with AirAsia.

6. Directors’ share options

There was no movement in Directors’ shareoptions during the year ended 30 June 2007.

Details of the Directors’ remuneration are set outin the Audited Financial Statements on page 112of this Annual Report.


C. Shareholders

Investor Relations

The Company is committed to maintaining goodcommunications with shareholders and investors.Communication is facilitated by a number of formalchannels used to inform shareholders about theperformance of the Group. These include the AnnualReport and Accounts and announcements madethrough Bursa Malaysia, as well as through the AGM.

Members of senior management are directly involvedin investor relations through periodic roadshows andinvestor briefings in the country and abroad withfinancial analysts, institutional shareholders and fundmanagers.

Reports, announcements and presentations given atappropriate intervals to representatives of theinvestment community are also available for downloadat the Group’s website at www.airasia.com.

Any queries or concerns regarding the Group may bedirected to the Investor Relations Department [email protected].

Annual General Meeting

Given the size and geographical diversity of ourshareholder base, the AGM is another important forumfor shareholder interaction. All shareholders are notifiedof the meeting together with a copy of the Group’sAnnual Report at least 21 days before the meeting isheld.

At the AGM, the Group CEO will conduct a briefpresentation on the Group’s performance for the yearand future prospects. The Chairman and all BoardCommittee chairmen will be present at the AGM toanswer shareholders’ questions and hear their viewsduring the meeting. Shareholders are encouraged toparticipate in the proceedings and engage withdialogue with the Board and Senior Management.

D. Accountability and Audit

Financial Reporting

The Board aims to ensure that the quarterly reports,annual audited financial statements as well as theannual review of operations in the Annual Reportreflect full, fair and accurate recording and reporting offinancial and business information in accordance withthe Listing Requirements of Bursa Malaysia.

The Directors are also required by the Companies Act,1965 to prepare the Group’s annual audited financialstatements with all material disclosures such that theyare complete, accurate and in conformance withapplicable accounting standards and rules andregulations. The Audit Committee assists the Board inoverseeing the financial reporting process.

Audit Committee and Internal Control

The Board’s governance policies include a process forthe Board, through the Audit Committee to reviewregularly the effectiveness of the system of internalcontrol as required by the Malaysian Code onCorporate Governance. A report on the AuditCommittee and its terms of reference is presented onpages 76 to 80 of this Annual Report.

The Board has overall responsibility for the Group’ssystem of internal control, which comprises a processfor identifying, evaluating and managing the risks facedby the Group and for regularly reviewing itseffectiveness in accordance with the Malaysian Code ofCorporate Governance.

The Board confirms that this process was in placethroughout the year under review and up to the dateof approval of these financial statements. The primaryaim is to operate a system which is appropriate to thebusiness and which can, over time, increaseshareholder value whilst safeguarding the Group’sassets. The system is designed to manage, rather thaneliminate, the risk of failure to achieve businessobjectives and can only provide reasonable and notabsolute assurance against material misstatement orloss.

The Board has good formal and transparentrelationships with the external auditors. From time totime, the external auditors inform and update theBoard and Audit Committee on matters that requiretheir attention.

The Statement of Internal Control is set out in page 81.This statement is made in accordance with a resolutionof the Board of Directors of AirAsia dated 4 October 2007.


The Audit Committee is governed by its Terms of Referenceas stipulated below:

Terms Of Reference Of The Audit Committee

The committee is governed by the following terms ofreference:

A. Purpose

To review and report to the Board on the quality andperformance of the internal and external auditfunction.

To review and recommend to the Board for approval,the Quarterly Reports to Bursa Malaysia and the AnnualAudited Accounts.

B. Membership

The Audit Committee is appointed by the Board ofDirectors and is composed at least 3 members, themajority of whom are independent non-executivedirectors.

At least one member of the audit committee: -

(i) must be a member of the Malaysian Institute ofAccountants; or

(ii) if he is not a member of the Malaysian Institute ofAccountants, he must have at least 3 years ofworking experience and:-

� he must have passed the examinationsspecified in Part I of the 1st Schedule of theAccountants Act 1967; or

The Audit Committee ensures the Group continues to apply high and appropriatestandards of corporate governance. In the year under review, the Audit Committeecontinued to monitor the effectiveness of the Group’s systems of internal control andrisk management.

Composition of the Committee and Meetings

During the financial year ended 30 June 2007, the Committee held a total of seven (7) meetings. The members of theCommittee together with their attendance are set out below:-

No. of MeetingsName Directorship Attended

Dato’ Leong Khee Seong (Chairman of the Committee) Independent Non-Executive Director 7

Fam Lee Ee Independent Non-Executive Director 6

John Francis Tierney (resigned on 28 February 2007) Non-Independent Non-Executive Director 6

Dato’ Anthony Francis Fernandes (appointed on 14 May 2007) Executive Director 1

Datuk Alias bin Ali (appointed on 14 May 2007) Independent Non-Executive Director 1

Note: All attendances reflect the number of meetings attended during the Members’ duration of services.

A U D I T C O M M I T T E E R E P O R T


� he must be a member of one of theassociations of accountants specified in Part IIof the 1st Schedule of the Accountants Act1967.

No alternate director can be appointed as a member ofthe Audit Committee.

Members of the Audit Committee elect a Chairmanfrom among themselves who is an IndependentDirector.

If a member of the Audit Committee resigns, dies or forany reason ceases to be a member with the result thatthe number of members is reduced below three (3),the Board shall, within three (3) months appoint suchnumber of new members as may be required to makeup the minimum of three (3) members.

The terms of office and performance of the AuditCommittee and each of its members shall be reviewedby the Board no less than once every three (3) years.However, the appointment terminates when a memberceases to be a Director.

C. Roles and Responsibility

– To consider the audit fee of the external auditor,any questions of resignation or dismissal of theexternal auditor and appointment of new externalauditor to replace outgoing auditor;

– To discuss with the external auditor before theaudit commences, the nature and scope of theaudit, and ensure co-ordination where more thanone audit firm is involved;

– To act as an intermediary between managementor other employees, and the external auditors;

– To review the quarterly and year-end financialstatements of the board, focusing particularly on:-

� any changes in accounting policies andpractices;

� significant adjustments arising from the audit;

� litigation that could affect results materially;

� the going concern assumption;

� compliance with accounting standards andother legal requirements.

– To discuss problems and reservations arising fromthe interim and final audits, and any matter theexternal auditor may wish to discuss (in theabsence of management where necessary);

– To review the external auditor’s managementletter and management’s response;

– To do the following where an internal auditfunction exists:-

� review the adequacy of the scope, functionsand resources of the internal audit function,and that it has the necessary authority tocarry out its work;

� review the internal audit programme andresults of the internal audit process andwhere necessary ensure that appropriateaction is taken on the recommendations ofthe internal audit function;

� review any appraisal or assessment of theperformance of members of the internalaudit function;

� to review the independence of the internalaudit function;

� approve any appointment or termination ofsenior staff members of the internal auditfunction; and

� inform itself of resignations of internal auditstaff members and provide the resigning staffmember an opportunity to submit reasonsfor resigning.


– Review the adequacy and the integrity of thecompany’s internal control systems andmanagement information systems, includingsystems for compliance with applicable laws,regulations, rules, directives and guidelines;

– To consider any related party transactions thatmay arise within the Company or Group;

– To consider compliance with the Company’sconflict of interest policy;

– To consider compliance with the Company’sinsider trading policy;

– To consider the major findings of internalinvestigations and management’s response;

– To consider other topics as defined by the Board;

– Internal controls and risk management

– To review the Company’s procedures for detectingfraud and whistle blowing and ensure thatarrangements are in place by which staff may, inconfidence, raise concerns about possibleimproprieties in matters of financial reporting,financial control or any other matters (incompliance with provisions made in the SecuritiesIndustry Act amended in 2004);

– To review management’s and the internal auditor’sreports on the effectiveness of the systems forinternal financial control, financial reporting andrisk management;

– To monitor the integrity of the Company’s internalfinancial controls;

– To review the statement in the annual report andaccounts on the Company’s internal controls andrisk management framework;

– To assess the scope and effectiveness of thesystems established by management to identify,assess, manage and monitor financial and non-financial risks. [Note: the board retains responsibility for the review of

the effectiveness of the system of internal control and must form its ownopinion despite aspects of that review being delegated to the audit

committee.]

D. Authority and Powers of the Audit Committee

In carrying out its duties, the Audit Committee shall, atthe cost of the Company,

– have authority to investigate any matter within itsterms of reference;

– have full, free and unrestricted access to theCompany’s records, properties, personnel andother resources;

– have full and unrestricted access to anyinformation regarding the Company;

– have direct communication channels with theexternal auditors and person(s) carrying out theinternal audit function;

– be able to obtain independent professional orother advice; and

– be able to convene meetings with the externalauditors, excluding the attendance of theexecutive members of the Audit Committee,whenever deemed necessary.

The Audit Committee is not authorised to implementits recommendations on behalf of the Board but reportits recommendations back to the Board for itsconsideration and implementation.

Where the Audit Committee is of the view that amatter reported by it to the Board of directors has notbeen satisfactorily resolved resulting in a breach of theListing Requirements of Bursa Malaysia, the auditcommittee is authorised to promptly report suchmatters to the Exchange.


E. Audit Committee Report

The Audit Committee is required to assist the Board toprepare the Audit Committee Report for inclusion inthe Annual Report of the Company.

The audit committee report shall include the following:-

a) the composition of the audit committee, includingthe name, designation (indicating the chairman)and directorship of the members (indicatingwhether the directors are independent orotherwise);

b) the terms of reference of the audit committee;

c) the number of audit committee meetings heldduring the financial year and details of attendanceof each audit committee member;

d) a summary of the activities of the auditcommittee in the discharge of its functions andduties for that financial year of the listed issuer;and

e) the existence of an internal audit function oractivity and where there is such a function oractivity, a summary of the activities of the functionor activity. Where such a function or activity doesnot exist, an explanation of the mechanisms thatexist to enable the audit committee to dischargeits functions effectively.

F. Meetings

The quorum for an Audit Committee Meeting shall beat least two (2) members; the majority present must beIndependent Directors.

The Audit Committee shall meet at least four (4) timesa year and such additional meetings as the Chairmanshall decide.

The External Auditor has the right to appear and beheard at any meeting of the Audit Committee and shallappear before the Audit Committee when required todo so.

The Chief Financial Officer and the Head of InternalAudit of the Company and of the Group shall normallyattend the meetings to assist in its deliberations andresolutions of matters raised. However, at least once ayear, the Audit Committee shall meet with the ExternalAuditors without the presence of the executivemembers of the Audit Committee.

The Internal Auditors shall be in attendance at allmeetings to present and discuss the audit reports andother related matters as well as the recommendationsrelating thereto and to follow-up on all relevantdecisions made.

The Company Secretary shall act as Secretary of theAudit Committee and shall be responsible, with theconcurrence of the Chairman, for drawing up andcirculating the agenda and the notice of meetingstogether with the supporting explanatorydocumentation to members prior to each meeting.

The Secretary of the Audit Committee shall beentrusted to record all proceedings and minutes of allmeetings of the Audit Committee.

In addition to the availability of detailed minutes of theAudit Committee Meetings to all Board members, theAudit Committee at each Board Meeting will report asummary of significant matters resolutions.

G. Internal Audit Department

The Head of the Internal Audit Department hasunrestricted access to the Audit Committee Membersand reports directly to the Audit Committee whosescope of responsibility includes overseeing thedevelopment and the establishment of the internalaudit function.

The above functions and duties are in addition to suchother functions as may be agreed to from time to timeby the Audit Committee and the Board.

The revised terms of reference were approved by theboard of directors of AirAsia Berhad on 22 December2004.


Summary of Activities

A summary of the activities performed by the AuditCommittee during the financial year is set out below.

Risk Management

� Reviewed the adequacy of the risk managementsystem for identifying and managing the Group’s risks.The Audit Committee called for an update in the riskassessment of the Group in order that the Company’sRisk Profile remains current and relevant.

� The Audit Committee also reviewed the Group’sBusiness Continuity Plan and called for a test andupdate of the plan.

Internal Audit

� Approved the Group’s Internal Audit Plan whichincludes the Audit Plans, outsourcing of audits and therelated fees.

� Reviewed internal audit reports issued by the InternalAudit department and external parties on theeffectiveness of internal controls, adequacy of riskmanagement and other compliance and governanceprocesses.

External Audit

� The Committee reviewed PricewaterhouseCoopersoverall work plan and recommended to the Board theirremuneration and terms of engagement as externalauditors and considered in detail the results of theaudit, PwC’s performance and independence and theeffectiveness of the overall audit process. TheCommittee recommended PwC’s re-appointment asauditors to the Board and this resolution will be put toshareholders at the AGMGroup External Auditor.

� Reviewed updates on the introduction of InternationalFinancial Reporting Standards and how they willimpact the Company and has monitored progress inmeeting the new reporting requirements.

Employee Share Option Scheme

� The Committee verified the allocation options pursuantto the criteria disclosed to the employees of the Groupand established pursuant to the Employee ShareOption Scheme for the financial year ended 30 June2006.

Internal Audit Function AndRisk Management Process

The Company has an adequately resourced internal auditfunction to assist the Board in maintaining an effectivesystem of internal control and the overall governancepractices within the Company. The audits and reviewsconducted by internal audit are defined in an annual auditplan that was reviewed and approved by the AuditCommittee at the beginning of each financial year. The planwas derived from a risk assessment process which considersthe risks within each department and the extent that itwould have an impact on the Company.

Sustaining the momentum for implementing an effectiverisk management process is a challenge as the Groupcontinues to experience dynamic growth which impacts theGroup’s risk profile. The process of continuously identifying,evaluating and managing risks is ongoing.

The Audit Committee has called for the implementation ofthe Company’s ‘whistleblowing’ procedures to enablecolleagues to raise concerns about financial reportingmatters and in compliance with Companies (Amendment)Act, 2007 requirements.


The Board remains committed to complying with the Malaysian Code of CorporateGovernance which “… requires listed companies to maintain a sound system of internalcontrol to safeguard shareholders’ investment and the Company’s assets” and Bursa Malaysia’sListing Requirements Paragraph 15.27 (b) which requires the Board to make a statementabout the state of internal control of the listed issuer as a group. The Board is pleased to issuethe following statement of internal control for the financial year ending June 2007.

Board AccountabilityOne of AirAsia’s primary corporate objective is to maximiselong term shareholder value through responsible andsustainable growth. To achieve this, the Board recognisesthe importance of upholding the highest standards ofcorporate governance and fully supports the spirit behindthe Malaysian Code of Corporate Governance.

The directors are responsible for the Group's system ofinternal controls and for reviewing its effectiveness inproviding shareholders with a return on their investmentsthat is consistent with a responsible assessment andmitigation of risks. This includes reviewing financial,operational and compliance controls and risk managementprocedures. Due to the limitations inherent in any suchsystem, this is designed to manage rather than eliminate riskand to provide reasonable but not absolute assuranceagainst material misstatement or loss.

Management is responsible for assisting the Boardimplement policies and procedures on risk and control byidentifying and assessing the risks faced, and in theimplementation of suitable remedial internal controls toenhance operational controls and enhance riskmanagement. Indeed, the first level of assurance comesfrom business operations which perform the day to day riskmanagement activity. The Board is informed of majorcontrol issues encompassing internal controls, regulatorycompliance and risk taking.

Integrating Risk Management with Internal ControlsThe Group continues to rely on the enterprise-wide riskmanagement framework to manage its risks and to form thebasis of the internal audit plan. The assurance function suchas the internal auditors performs review of control activitiesand provides regular written reports to directors. Thisprocess is continually reviewed and strengthened asappropriate. A key performance indicator in the followingyear is to roll out risk management to the rest of theGroup’s associates.

Business Continuity ManagementBusiness continuity management is regarded an integralpart of the Group’s risk management process. The Group isworking with Malaysia Airports Holdings Berhad toformulate detailed strategies and operational requirementsto recover operations in the event of a disaster.

The Group has completed its Business Continuity PlanningManual which will require testing as well as scheduledupdating and revision. Business continuity management willalso need to be initiated in the rest of the Group’s associates.

Control Structure and EnvironmentThe key elements of the Group’s internal control system aredescribed below:

� Clearly delegation of responsibilities to BoardCommittees within the definition of terms of referenceand organisation structures;

� The Audit Committee, chaired by an independent non-executive director reviews the internal controls systemand findings of the internal auditors and external auditors.

� The Internal Audit Department is responsible forundertaking regular and systematic review of theinternal controls to provide the Audit Committee withsignificant summary reports on the effectiveness andweaknesses of internal controls. Management isresponsible for ensuring that corrective actions toaddress control weaknesses are implemented within adefined time frame. The status of implementation ismonitored through follow-up audits which are alsoreported to the Audit Committee.

� The Group is in the midst of formally documentinginternal procedures and processes in StandardOperating Procedures. This would be critical to ensurecompliance with internal controls and relevant lawsand regulations.

� Heads of Department present their annual budget,including financial and operating targets and capitalexpenditure plans for the approval of the Group ChiefExecutive Officer.

� Group annual budget is prepared and tabled for Boardapproval. These budgets and business plans arecascaded throughout the organisation to ensureeffective execution and follow through. Actualperformance is compared against budget and reviewedby the Board.

The statement does not include the state of internalcontrols in material joint ventures and associatedcompanies. There was no material loss incurred as a result ofinternal control weaknesses.

S TAT E M E N T O N I N T E R N A L C O N T R O L


The information set out below is disclosed in compliancewith the Listing Requirements of Bursa Malaysia:-

1. Utilisation of Proceeds Raised FromCorporate ProposalThere were no proceeds raised by the Company fromcorporate proposals during the financial year ended30 June 2007.

2. Share Buy-BackThe Company did not make any proposal for sharebuy-back during the financial year.

3. Options, Warrants Or Convertible SecuritiesExercisedThe Company did not issue any warrants or convertiblesecurities during the financial year ended 30 June 2007.The AirAsia Berhad Employees Share Option Scheme(“ESOS”) came into effect on 1 September 2004. Thedetails of the ESOS exercised are disclosed in pages132 to 134 of the financial statements.

4. American Depository Receipt (“ADR”) OrGlobal Depository Receipt (“GDR”)ProgrammeThe Company did not sponsor any ADR or GDRprogramme during the financial year ended 30 June2007.

5. Imposition Of Sanctions And/Or PenaltiesThere were no public sanctions and/or penaltiesimposed on the Company and its subsidiaries, Directorsor Management by the relevant regulatory bodiesduring the financial year ended 30 June 2007.

6. Non-Audit FeesThe amount of non-audit fees incurred for servicesrendered to the Group by the external auditors andtheir affiliated companies for the financial year ended30 June 2007 are as follows:-

2007RM’000

a) PricewaterhouseCoopers 107Taxation Services Sdn Bhd

b) PricewaterhouseCoopers, Malaysia 65

Total 172

7. Variation In ResultsThere were no profit estimations, forecasts orprojections made or released by the Company duringthe financial year ended 30 June 2007.

8. Profit GuaranteeDuring the financial year ended 30 June 2007, theGroup and the Company did not give any profitguarantee.

9. Material Contracts Involving Directors’ AndMajor Shareholders’For the financial year ended 30 June 2007, no contractof a material nature was entered into or subsistedbetween the Company and its Directors or majorshareholders except for the Sublease Agreement dated28 July 2006 (“Sublease Agreement”) with Fly AsianXpress Sdn Bhd) (“FAX”) (now known as AirAsia X SdnBhd).

This agreement was entered into on the back of aLease Agreement (“Lease Agreement”) between theCompany and Penerbangan Malaysia Berhad (“PMB”) tolease 7 Fokker (at USD40,000/month/aircraft) and 5Twin Otter aircraft (at USD20,000/month/aircraft) for3 years and 5 years respectively to enable FAX tooperate the Rural Air Services. The terms andconditions of the Sublease Agreement are identical tothe terms and conditions of the Lease Agreement. TheSublease Agreement is a related party transactionwhich the Company had obtained a conditional waiverfrom the Listing Requirements of Bursa Malaysia fromseeking a shareholders’ approval.

The Company issued a Notice of Termination of theLease Agreement to PMB on 30 May 2007 and FAX hasterminated the Sublease Agreement with the Companywith effect from 30 September 2007 as the Rural AirServices have been handed over to a subsidiary ofMalaysian Airlines effective from 1 October 2007.

Dato’ Anthony Francis Fernandes and Dato’ Kamarudinbin Meranun were deemed interested in the SubleaseAgreement with FAX as both have a substantial interestin FAX and are Directors and are substantialshareholders of the Company. The interested directors’and interested major shareholders’ direct and indirectshareholdings in AirAsia are as set out on pages 152to 155.

A D D I T I O N A L C O M P L I A N C E I N F O R M AT I O N

Documents

AirAsiaBerhad - AirAsia Malaysiastgsfcms.airasia.com/.../AirAsia/IR/annual-report-corporate-2007.pdfAirAsiaBerhad(“AirAsia”or“theCompany”) isanamesynonymouswithlowfares,