Wednesday, July 15, 2009

AirAsia Never Considered Race a Factor

15 July 2009

I refer to the story headlined "Affirmative action is viewed as barrier to growth in Malaysia; AirAsia's plans for a new hub run into opposition from ethnic Malays" (News in Depth, July 9).

I strongly resent the implication in the headline and the story that AirAsia's issues with Malaysia Airports Holdings Bhd. regarding a new low-cost carrier terminal are caused by the "tenet" of "affirmative action" and "opposition from ethnic Malays." Not once during the interview did I mention the issue of race or "affirmative action." And never in my numerous public statements on this dispute have I indicated that racial discrimination was a factor.

AirAsia's issues with MAHB center on the dispute between the two entities regarding airport charges and fees. AirAsia feels we have been overcharged. We also feel, rightly or wrongly, that our concerns may not be given a fair hearing because of the lack of a level playing field, as both MAHB and Malaysian Airlines System are government-linked companies owned by Khazanah Nasional.

The issue of a level playing field was addressed by Prime Minister Najib Tun Abdul Razak on June 30, when he declared that government-linked companies would have to compete fairly with the private sector and would no longer enjoy any special consideration from the administration. I publicly hailed the announcement. I believe the prime minister's commitment to a level playing field will remove any doubt or perception that the concerns of the private sector, of which AirAsia is a vibrant member, will be treated as secondary to the interests of government-linked companies.

The New Economic Policy was born out of necessity and served a crucial social and national goal. Prime Minister Najib, despite just over three months in office, has already moved to adapt the NEP for the current era.

Tony Fernandes
Group CEO
AirAsia Berhad
Kuala Lumpur

Fernandes and Jala among prominent trustees in 1Malaysia Foundation

15 July 2009

KUALA LUMPUR: The bosses of Malaysia’s two airlines — Malaysia Airlines managing director and chief executive officer Datuk Seri Idris Jala and AirAsia group chief executive officer Datuk Seri Tony Fernandes – are among eight prominent Malaysians on the board of trustees of the newly set up 1Malaysia Foundation.

“It was a fantastic achievement for us to be able to get them in and 1Malaysia Foundation is ready to take off,” said foundation chairman Dr Chandra Muzaffar at a press conference yesterday.

The foundation, which is a non-profit non-governmental organisation, is not linked to any political party and hopes to develop, support and spearhead activities and programmes that will engage all Malaysians towards national unity and the 1Malaysia concept, he said.

Jala said there was a need for Malaysians to find a way to work and compete together just as MAS and AirAsia have done and achieve excellence for the country.

“You need healthy competition to bring out the champion,” said Jala, adding that efforts of 1Malaysia should incorporate the rural poor.

Fernandes said diversity was Malaysia’s strength and a lot of work needed to be done to get people to work together.

“The brand Malaysia is a multicultural heritage and that can attract big companies to set up their companies here,” he said.

The first activity by the foundation is the 1Malaysia Story which will be launched in August through its website

Prime Minister Datuk Seri Najib Tun Razak is the foundation patron.

Other members of the board include holder of the Sheikh Abdullah Fahim Chair at the Islam Hadhari Institute Datuk Dr Ismail Ibrahim, Malaysian Medical Relief Society president Tan Sri Dr Jemilah Mahmood and Malaysian Institute of Economic Research board of trustees member Prof Emeritus Datuk K. J. Ratnam.

The other members are National Institute of Occupational Safety and Health chairman Tan Sri Lee Lam Thye and Institute for Strategic and International Studies Malaysia director-general Dr Mahani Zainal Abidin

Reduced gearing for AirAsia

15 July 2009

Move to part-defer taking delivery of aircraft in 2010 should lower debt obligations

PETALING JAYA: AirAsia Bhd’s decision to defer taking delivery of eight Airbus A320 aircraft next year is expected to bring its gearing level down, say analysts.

AmResearch views the development positively, saying AirAsia would manage to avoid building up significant capital and finance costs in its books over a soft phase in passenger demand cycle.

The research house said the move would also lift the market’s previous concerns on AirAsia’s aggressive expansion plan amid a weak demand environment, which could have resulted in a mismatch between slowing earnings growth and escalating costs.

“Assuming the deferral were to materialise, we will lower our net gearing forecast to 2.7 times from 3.1 times in 2010 and 2.8 times from 3.6 times in 2011 – extending out the gearing up cycle over AirAsia’s growth phase.

“Due to earlier assumptions of poor load factors, the elimination of depreciation and finance charges actually raise our net profit forecast by 9% to 16% to RM537mil in financial year ending Dec 31, 2010,” AmResearch said.

On Monday, AirAsia said it was planning to defer taking delivery of eight A320s for 2010 and may defer taking delivery of another eight aircraft in 2011.

The low-cost carrier was originally scheduled to take delivery of 24 aircraft next year and another 24 in 2011.

OSK Research analyst Ng Sem Guan said the deferment could help the airline lower its “relatively high” gearing level.

“Although AirAsia announced a proposed private placement recently, its gearing remains a concern,” he said, adding that the deferment reflected the less-than-exciting outlook for the carrier.

“We think the deferment suggests that the outlook for the carrier is tougher than expected. The rebound in crude oil price and the fact that the company has unwound all its fuel hedge positions may pressure operating costs. This prompts us to revise downwards our FY10 earnings by 15.5%,” he said.

However, Ng said AirAsia’s on-going fund raising exercise might provide some excitement for its share price performance.

ECM Libra Investment Research said although the deferment of delivery of the eight aircraft next year might cap earnings for 2010, it would help lighten the the group’s debt obligations.

“AirAsia’s gearing level is expected to be five times in FY10. However, the deferment of the aircraft delivery will reduce it a little to a gearing level of about 4.3 times. We also expect its cash balances to improve in FY10 as a result,” it said.

The research house said it was less concerned about the earnings opportunity cost and was more positive about the effects the deferment would have on AirAsia’s balance sheet.

easyJet, Ryanair, Southwest and AirAsia gain, Virgin Blue loses ground

13 July 2009

Worldwide LCC share prices generally gained on Monday (13-Jul-09), with Norwegian Air Shuttle leading the way, with an 8.3% increase. The carrier is scheduled to release its second quarter financial figures today. Also in Europe, easyJet and Ryanair both gained 3.5%.

In the US, AirTran, Allegiant, JetBlue and Southwest all rose amid a stronger session on Wall Street.

In the Asia Pacific region, AirAsia's shares were up 0.9%, despite overall market weakness and Virgin Blue fell 4.9% as the carrier's management stated it sees "capital management initiatives as appropriate, given prevailing macro-economic conditions", but its Board "had not approved any such transaction as has been reported".

Selected LCCs daily share price movements (% change): 13-Jul-09

AirAsia launches two new routes

14 July 2009

PETALING JAYA: AirAsia has launched two new flights from Miri and Tawau to Singapore.

AirAsia will be offering all-in fare from Tawau to Singapore from RM79 (S$42); and Miri to Singapore from RM59 (S$32) from July 14 to 19 — for travel period from Sept 9 this year till end of April next year.

Bookings can be made exclusively on line via and

AirAsia through its holiday division Goholiday, is also offering guests free rooms when tourists book at the airline’s partner hotels in Singapore. The promotion is only valid via online at

Promotional seats and free rooms are limited and are only available on first come, first serve basis.

The airline’s first East Malaysia connection with Singapore was from Kota Kinabalu and Kuching which started last November.

To date, AirAsia has 406 weekly flights to and Singapore.

The new route will draw more in-bound tourist traffic from Singapore into Sabah and Sarawak through AirAsia’s X’s long haul network.

AirAsia: Plane delivery to be partly deferred

14 July 2009

AirAsia to hold back on eight aircraft each in 2010 and 2011

KUALA LUMPUR: AirAsia Bhd plans to defer taking delivery of eight Airbus A320 aircraft for 2010 and may opt to do the same for another eight aircraft the following year, said its group chief executive officer Datuk Seri Tony Fernandes.

“We are negotiating with Airbus SAS to push the orders to the back end. Our focus next year is to consolidate our aircraft type to all A320s and return the 13 B737 that we have leased from GE Commercial Aviation Services (GECAS),” he told StarBiz in an interview.

Datuk Seri Tony Fernandes ... ‘we are negotiating with Airbus SAS to push the orders to the back end.’

AirAsia became the largest customer of the Airbus A320-200 in December 2007 after it placed a firm order for a total of 175 aircraft, with an option for 50 more. Deliveries are expected to run until 2014. For 2010 and 2011, the airline is slated to take delivery of 24 aircraft each year.

As at end-June, the budget airline had 61 aircraft of which 48 are for its Malaysian operations, and the rest for Thai AirAsia and Indonesia AirAsia.

Besides that, it also has a fleet of 16 B737, of which three are its own and 13 leased from GECAS.

With the deferment, AirAsia is expected to push most of it new aircraft to its associates in Indonesia and Thailand, leaving very few new aircraft for its Malaysian operations, thus limiting its growth potential going forward although the two units will be able to expand more aggressively.

“Deferring the delivery of these aircraft is an opportunity lost to AirAsia as it would mean forgoing an attractive 12-year aircraft financing package which is close to LIBOR (rates) negotiated just prior to the economic crisis. (But issues arising from) the uncertainty of the new LCCT to be completed by July 2011 far outweighs the opportunity lost in this attractive financing (package),’’ said Datuk Kamarudin Meranun, the deputy CEO of AirAsia.

Fernandes denied that the plan to defer aircraft deliveries had to do with raising funds for the purchase of the aircraft, saying “the funding for this and next year is in order.’’

In February this year, AirAsia mandated Barclays Capital, the investment banking division of Barclays PLC, to finance 15 of its new Airbus A320.

“We are in negotiations with the supplier for all aircraft to have minimal or zero cash outlay and that will not put a strain on our cash.

“We are not delaying the deliveries because of cashflow, we need the planes for our operations but there is an infrastructure risk out there that we cannot afford to take,’’ Fernandes said.

All airlines had been hurt by the economic crisis, Fernandes pointed out, but “our cashflow is very healthy. In fact, we are working towards having RM1bil cashflow by the first quarter of 2011.’’

AirAsia had RM224mil cash and RM6.93bil debts in its books at the end of March 31, most of it for aircraft financing.

But for this year, Fernandes said “there will be no delays in taking the aircraft deliveries.’’

AirAsia has taken delivery of five of 14 aircraft scheduled for this year.

AirAsia has been expanding routes and frequencies when many airlines globally are cutting back, with the budget carrier aiming to expand to places like India, Middle East and North America.

“Expansion is necessary but we will never stretch ourselves. Imagine this, if we were to slow down we could have been crushed by our competitors from Singapore. We believe in growing but in a sensible manner,’’ Fernandes said.

AirAsia was only one of a handful of airlines to post a profit in the first quarter.

AirAsia’s earnings in its March quarter rose 26% to RM203.2mil from a year earlier due to higher passenger numbers from additional routes.

An AirAsia aircraft is being pulled at Kuala Lumpur International Airport’s low-cost carrier terminal in Sepang. With the deferment, AirAsia is expected to push most of its new aircraft to its associated in Indonesia and Thailand.

AirAsia’s Big Sale … prices are next to noodles

13 July 2009

AirAsia has announced it latest Big Sale with low prices from Australia connecting travellers to the vast AirAsia network with a wide selection of destinations throughout Asia and beyond.

Fly direct from Melbourne, Perth and Gold Coast to Kuala Lumpur from $130* one way. From Kuala Lumpur you can then select an Asian destination of your choice.

AirAsia also flies direct to London (Stansted) daily.

AirAsia is offering an assortment of Asian destinations from Kuala Lumpur including one way to Penang from $12*, Macau from $27* and Hangzhou (China) from $76*. Or, fly through from KL to London from $202* one way.

Prices include airport taxes and reflect AirAsia’s recent decision to scrap administration fees entirely.

With 125 routes, more than 65 destinations, over 400 flights daily and the carrier’s famous friendly service, AirAsia has been voted the world’s best low-cost airline (Skytrax World Airline Awards 2009).

AirAsia’s Big Sale specials are available online until 19 July, 2009 or until sold out and are valid for travel between 1 August and 30 November, 2009.

Travellers can also log onto AirAsia’s one-stop travel portal at, which offers a range of more than 25,000 three-star, five-star and boutique hotels to choose from.

AirAsia offers a comprehensive online booking service that will save guests money for meals, luggage and on-flight extras.

* Conditions apply, subject to availability. Lowest possible sale fares are online only.