Wednesday, December 23, 2009

OSK: AirAsia, Jetstar Cost-Saving Collaboration May Bolster Bottomlines

21 December 2009

KUALA LUMPUR-- The potential cost-cutting collaboration between AirAsia and Jetstar Airways is definitely welcome, said OSK Research.

"Any positive cost reduction may eventually bolster their bottomlines," it said in a research note here Monday.

However, OSK Research also stated, it was not overly excited with the proposed cooperation as it was still preliminary.

"We do not see it materialising so soon," it said.

It was reported that AirAsia and Jetstar, Qantas Airway Ltd's low-fare unit, are discussing cooperation towards cutting costs amid rising competition for the budget-conscious Asian traveller.

AirAsia has not made any formal announcement pertaining to the cooperation. However, a news report said a partnership may cover procurement and ground handling, generating as much as 10 per cent in cost savings.

"Despite the potential collaboration, we remain mindful that high crude oil prices may squeeze AirAsia's margins.This is especially so, given that price undercutting activities, may persist in the short to medium term," OSK Research said.

Due to AirAsia's recent weaker than expected results, OSK Research has kept a "sell" rating for the budget airline.


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