Saturday, August 8, 2009

Capital city rivals out to land Asia

07 August 2009

MELBOURNE airport chief executive Chris Woodruff is determined to grab market share from arch-rival Sydney and points to new services from AirAsia X as the latest coup in his ongoing battle.

The competitive British airport chief wants to boost Melbourne's share of the national aviation passenger market from 20 to 25 per cent and says it will do the best it can to convince airlines it can offer better service and lower prices than its northern neighbour.

"They have a market that's rightfully mine," Mr Woodruff said during a press conference in Sydney this week to announce the new services. "If you do the research there's ... anywhere between 600,000 and a million people who want travel to and from Victoria and can't internationally and have to go to Sydney.

"So there's about a million there and we'll try and bring our customers home."

AirAsia X will increase services from Kuala Lumpur to Melbourne by four flights to 11 a week from December 1 and expects to boost that to double daily next year. That is about the same time the long-haul low-cost carrier, which also serves the Gold Coast and Perth, hopes to start serving Sydney.

The airline estimates it has already captured a third of the KL-Melbourne market and it plans to boost this with cheap fares aimed at leisure, visiting friends and relatives (VFR) and student traffic.

Mr Woodruff said more Malaysians visit Melbourne than any other Australian city.

"It was already a big market but after AirAsia X started serving it, that market grew by 33 per cent ... today's announcement will grow that even more and it's very, very Melbourne-centric."

AirAsia X chief executive Azran Osman-Rani said the new Melbourne services were timed to take advantage of the Christmas travel season and would make it easier for passengers to connect with flights in both Asia and Australia.

"I think one of the issues we've had flying in once a day, late at night, into Melbourne is that it makes it a bit difficult to take an onward flight to Tasmania or Sydney," he said. "Now with the second flight, for example, it's much easier for somebody from Sydney to come in during the day and catch the day flight and return."

Mr Osman-Rani said the 33 per cent growth in the Melbourne-KL market demonstrated that the airline was increasing the market and not just taking it from other carriers.

He believed it would grow disproportionately higher than the four new services would indicate because of a network effect.

Asked about delayed services to Sydney, Mr Osman-Rani reiterated comments reported in The Australian last Friday that the service was still on the cards and under consideration by the Malaysian government.

He said this year's delivery of A330 aircraft was already spoken for with increased frequencies to destinations such as Melbourne and the Gold Coast but three more planes were due to be delivered next year.

AirAsia X had benefited from some trading down by passengers during the economic crisis and carried more than double the passengers in the first half of this year than it did for all of last year. But the environment had been tough and yields had "taken a beating".

"I don't say this has been a fantastic time for us because it's equally challenging as well," he said. "To grow those passenger numbers we have had to be very aggressive on pricing."

The low-cost carrier is also revamping its cabins and introducing what looks like a business class seat which it describes as "almost lie flat". The product, which replaces the airline's XL seat, does not come with free-flowing champagne but passengers can sign up for packages with greater ticket flexibility and extras such as luggage.

"We realised that the incremental cost of this seat is not that significant when you divide it over the number of flights that we do in the lifetime of the seat," he said. He said the new seats were not expected to be huge revenue earners -- about a 1 to 1.5 per cent increase -- but they would enhance the brand.

Current estimates were that about 15 per cent of its customers on flights to London were business travellers and about 8 to 10 per cent across the network.

AirAsia seeing strong demand for share issuance but share price slumps

04 Aug 2009

LCC shares were mixed on Tuesday (04-Aug-09). Oil prices eased on Tuesday, after a four-day 13% rally, with New York oil prices slipping USD0.16 cents to settle at USD71.42, while in London, oil prices gained USD0.73 to end the day at USD74.28.

Selected LCCs daily share price movements (% change): 04-Aug-09

Leading the LCC gainers yesterday was Jazeera, jumping 4.4%. Both Jazeera Airways and AirArabia (-1.0%) have been rated “buy” in new coverage at Nomura Holdings.

In the US, Southwest surged 4.3%, while AirTran also gained yesterday, up 1.6%. The carrier transported 2.4 million passengers in Jul-2009, a 3.5% year-on-year reduction, with load factor also down, by 0.9% to 88.3%, as the carrier’s 4.1% capacity (ASMs) reduction in the month was outpaced by a 5.1% traffic (RPMs) reduction.

Also reporting Jul-2009 traffic highlights yesterday was struggling Eastern European LCC, SkyEurope, which experienced a 37.1% year-on-year reduction in passenger numbers, due to its strategic reduction in capacity levels (-38.0%), as part of efforts to mitigate the negative impacts of the economic downturn. The carrier, which is now in its second month of reorganisation, saw load factors strengthen by 1.1 ppts to 80.1% in the month. The carrier’s share price slipped 3.2%.

Elsewhere in Europe, easyJet shares gained 1.2%, with Ryanair also up by 1.8%.

In the Asia Pacific region, AirAsia’s share price slumped 5.8%, as it moves to issue new shares next month.

Thursday, August 6, 2009

AirAsia announces Bangkok-Taipei route

06 August 2009

PETALING JAYA: AirAsia will introduce a new international route from Bangkok to Taipei on Sept 25.

The airline will be offering an all-in-fare from as low as NT$690 (RM73) one-way between Taipei and Bangkok which will be exclusively available online via AirAsia’s website at

The low fares are only available for early birds for the booking period of Aug 6 to 11 for travel from Sept 25 to Jan 9 next year.

AirAsia’s commercial regional head Kathleen Tan said that since the airline’s recent launch connecting Taipei and Kuala Lumpur, it has seen strong loads which allowed the airline an additional frequency from five times weekly to daily.

“With AirAsia adding Taipei to its network, Taiwanese can now opt for a holiday with our everyday low fares to our vast network across Asia, Australia and Europe,” said Tan in a press statement yesterday.

Wednesday, August 5, 2009

AirAsia down on concerns over diluted earnings

05 August 2009

PETALING JAYA: AirAsia Bhd shares, which have been climbing since early last month, took a tumble after the budget carrier announced plans to sell 481.14 million new shares to pare down its debt.

AirAsia was among the day’s top losers, shedding 9 sen, or 5.84%, to RM1.45, on volume of 9.5 million shares.

The counter hit a 12-month high of RM1.57 on Monday.

An analyst said the price drop was due to the private placement announcement as the exercise would dilute AirAsia’s earnings.

In a filing with Bursa Malaysia on Monday, the company proposed a private placement of up to 481.14 million new 10 sen shares, which could potentially raise gross proceeds of up to RM601.43mil.

The proceeds will help bolster its cash reserves to the targeted RM1bil.

The placement will reduce the airline’s net gearing from 3.71 times to 2.56 times based on its unaudited accounts as at March 31.

Chief executive officer Datuk Seri Tony Fernandes was quoted by Bloomberg as saying the proceeds would be used in part to repay loans taken to help pay for as many as 175 new Airbus SAS planes as the airline added routes to China and India.

ECM Libra Investment Research said the proposed exercise would enlarge the budget carrier’s outstanding share base up to 2.88 billion shares and have a dilutive effect on earnings.

“As a result of the enlarged share base, on a maximum case scenario, our financial year ending Dec 31 (FY09) earnings per share (EPS) would decrease by 17.8% to 20.7 sen from 25.2 sen.

“Our EPS estimates for FY10 and FY11 would also be reduced by a similar quantum to 21.7 sen and 25.8 sen accordingly,” the research house said.

ECM Libra said AirAsia’s gearing would also be “reduced significantly” as a result of the proposed exercise.

It said the airline’s net gearing may decrease to 2.5 times from 3.71 times, representing a significant 32.6% drop.

“We are optimistic of this proposed exercise and opine that the 17.8% dilution in EPS would be offset by the 30.9% decrease in net gearing,” it added.

Meanwhile, CIMB Investment Bank Bhd, the adviser and placement agent for the exercise, clarified yesterday that the issue price of AirAsia’s placement shares would be fixed at a date to be determined later by way of book-building exercise.

In a statement to Bursa Malaysia, CIMB Investment said the book-building exercise would be undertaken by placement agents appointed or to be appointed by the company after it had received approvals from the stock exchange and shareholders.

“As such, the issue price of the placement shares has not yet been fixed,” it said.

For illustrative purpose only, based on the five-day weighted average market price of AirAsia shares of RM1.46 (up to and including Aug 3), the proposed private placement would raise gross proceeds of up to RM702.47mil.

CIMB Investment said the gross proceeds would be subject to change at the price-fixing date to be determined later.

New services for AirAsia X responding to Melbourne’s growing international market

05 August 2009

Melbourne Airport welcomes AirAsia X’s announcement today to increase flights between Kuala Lumpur and Melbourne by four per week � from 7 to 11 weekly services. MAIN TITLE The long-haul/low-cost airline commenced services flying direct between Melbourne and Kuala Lumpur in November last year with four services per week.

Melbourne Airport CEO Chris Woodruff said “These extra services provide further opportunities for increased business and leisure travel between Victoria to Malaysia and beyond, a win for the state. In what is a challenging operating environment for aviation, the Melbourne market is doing well, and our airlines are responding to this.

“Our Malaysian market grew 33% over the last financial year, a growing market these new services from AirAsia X will directly serve. These services will connect with AirAsia’s ever growing Asian network.

“This announcement comes on the back of Singapore Airline’s decision to introduce daily A380 services in and out of Melbourne in September, Qatar who will commence services in December and increased capacity from our other international airlines Emirates, Air China, China Eastern, Vietnam Airlines, Philippine Airlines, Pacific Blue and Garuda Airways in the last 12 months.”

These new services, set to commence December 1, are testament to Victoria and Melbourne’s global standing. Melbourne Airport continues to work closely with our airline customers to keep costs significantly lower than our competitors whilst maintaining excellent service levels. In addition, we are investing in Victoria’s future with our $330M international terminal expansion.

AirAsia X to Hub in Abu Dhabi: AirAsia CEO

05 August 2009

DUBAI — Malaysia’s AirAsia X, one of the few budget airlines flying inter-continental routes, has chosen to make Abu Dhabi its regional hub for connecting flights to possible destinations in Europe, Africa and central Asia.

AirAsia X ruled out Dubai, Sharjah and other cities in the Gulf in selecting the UAE capital as an overseas hub, said Tony Fernandes, Chief Executive Officer of AirAsia Bhd., the regional low-cost carrier that owns a stake in AirAsia X. Both airlines are headquartered in Kuala Lumpur.

“We’re now looking at flying to Abu Dhabi. That will be our first point in the Middle East,” Fernandes told Khaleej Times in a telephone interview on Tuesday. “If things work out well, hopefully we could start flying there toward the latter half of next year.”

Executives at Abu Dhabi Airports Company, operator of the city’s international airport, were travelling and could not immediately be reached for comment.

AirAsia X was among the first carriers to adapt the no-frills business model, which typically applies to flights lasting no more than four hours, to longer journeys of eight hours or more. Most of the other pioneers of long-haul budget flights either dropped the idea because they couldn’t make a profit, or, like Hong Kong Oasis Airlines, went bankrupt trying. AirAsia X appears to be an except ion. Founded in 2007, the carrier’s wide-body Airbus A330 and A340 jetliners fly routes to London, Taipei and to cities in China and Australia. To support its expansion plans, AirAsia X announced an aircraft order at the Paris Air Show in June for 10 Airbus A350s, a larger and more fuel-efficient model that is still under development.

Frankfurt and Cairo are among the prospective destinations that AirAsia X would like to serve from Abu Dhabi, Fernandes said. The airline is also considering flying to cities in eastern Africa, possibly Nairobi. At the moment, he complained, “You just can’t get to East Africa from Asia.”

As a hub, Abu Dhabi would be a place for AirAsia X planes to refuel and take on new passengers before flying onward.

In a first step toward this network expansion, AirAsia X plans in October to begin service between Abu Dhabi and Kuala Lumpur. The carrier will start later this month to sell advance tickets for these flights, Fernandes said.

AirAsia is older and bigger than its long-haul affiliate and has become one of the world’s most successful carriers. Fernandes recognises that the UAE is already home to two low-cost airlines — Sharjah-based Air Arabia and Dubai’s flydubai, but he believes that the Gulf region has enough untapped demand to support more no-frills carriers like AirAsia to fly short routes in and around the Middle East.

Indeed, he might want to start one himself. “Given the right partners, yes, we would,” he said. “It would be great to have a low-cost carrier out of Abu Dhabi. I think there’s room, definitely.

The Saturdays live at Mois Club, Penang

04 Aug 2009

The best day of the week comes back again to Malaysia. The UK girl group phenomenon The Saturdays return to Malaysia and they’re touring all over the region courtesy of the world’s largest Music company Universal Music and AirAsia the world’s best low-cost Airline.

The five-girl pop group comprising Una Healy, Rochelle Wiseman, Vanessa White, Mollie King, and Frankie Stadford, released their debut album Chasing Lights recently in March in Malaysia. The album, released late last year in the UK, has to date spawned four hit singles, including the top 10 hit, If This Is Love, Issues and its biggest UK singles hit, Just Can’t Get Enough, a remake of single from Depeche Mode cater for the charity work of Comic Relief.

The all-girl pop group recently came down to Malaysia for a Press Conference on the 12th of May 2009 to officially launch their album “Chasing Lights”. The Press Conference held at Zouk, KL showed the girls to the Malaysian and Regional Media from countries such as Hong Kong, Indonesia, Singapore and many other countries who welcomed the five British Beauties. The Saturdays were flown all the way from the UK by AirAsia, the world’s best low-cost airline. The showcase was in conjunction with the airlines’ brand campaign “Have You Flown AirAsia Lately” when the girls were in KL in the month of May to position the airline as trendsetters. AirAsia, named the World’s Best Low-Cost Airline by Skytrax in a survey of 16.2 million traveler interviews, has the most extensive network of destination in Asia.

This time around AirAsia is bringing the group for a full-fledged regional tour in August covering Malaysia, Thailand and Manila in Southeast Asia. Southeast Asia is the first tour destination of the group. The Saturdays first showcase performance will be in Zense night club in Bangkok on the 4th of August and before they head on to Malaysia’s largest island state Penang, where they’ll be performing on the 5th of August at Mois Club. One of the hottest and happening nightspots right in the heart of Penang, where invited guests will be there to catch these beautiful ladies strut their dance moves. This tour rides on the girls climbing popularity in the region having had massive success with their singles “UP” and “ISSUES” in the #1 highest rated English radio station Hitz.FM.

Don’t miss the amazing opportunity to catch the girls live in Penang as they’re only here for a one-night performance that’s not to be missed. For those of you who want to get tickets to this non-stop dance party tune in to your local radio stations and newspapers to get your names into the guest list. So what are you waiting for, get moving and get ready to party like it’s a Saturday!

AirAsia to cut debt with funding; stock falls 6 pct

04 Aug 2009

KUALA LUMPUR- Southeast Asia's largest budget carrier, AirAsia (AIRA.KL), has seen strong demand for its share issue worth $172 million, which it will use to reduce its debt, Chief Executive Officer Tony Fernandes said on Tuesday.

The airline plans to place up to 481.1 million shares, representing a 20 percent stake, to buyers to be identified later, sending its stock 6 percent lower.

As of mid-June, AirAsia was one of Airbus's biggest customers in terms of outstanding orders.

Fernandes said the company's new shares will be priced at a 5-10 percent discount to the market price of AirAsia shares at the time of issue.

"There's a lot of liquidity in the market. We think (now) is a good time to reduce our gearing," he told Reuters by telephone.

By 0400 GMT, AirAsia shares were down 6.5 percent at 1.44 ringgit with more than 5.0 million shares traded against a daily average of 4.3 million shares over the past 30 days.

Maybank Investment Bank analyst Khair Mirza said the airline's gearing will drop to 3 times by end-2009 from 3.8 times. "But we consider the 17 percent earnings per share dilution a steep price to pay for a temporary respite," said Khair, who has a sell recommendation on the stock.

AirAsia has received strong expressions of interest from both foreign and local institutional funds for the new shares, Fernandes said, adding that the placing is expected to be completed by the second week of September.

The stock has jumped 69 percent so far this year, outperforming a 34 percent rise in the broader market .KLSE.

"We recommend investors to switch to Malaysia Airports (MAHB.KL) for low-risk leverage on the air travel market's potential recovery in 2010," said Maybank's Khair.

AirAsia releases its second-quarter results on August 12.

Proposed amendments to AirAsia Berhad 's memorandum of association

04 Aug 2009

The Board of Directors' of AirAsia Berhad (the Company or AirAsia) wishes to announce that the Board had on 3 August 2009 proposed to seek shareholders' approval on the Proposed Amendments by way of a Special Resolution at the forthcoming Extraordinary General Meeting of the Company to be convened at a later date. The proposed amendment to the Memorandum of Association is to more accurately reflect the principal activities of the Company and its subsidiaries and to coincide with the increased growth in terms of areas of ancillary products and/or services being offered to compliment the principal activities.

Tuesday, August 4, 2009

AirAsia targets RM1bil cash reserves

04 August 2009

Budget carrier sees RM500mil proceeds from private placement

SEPANG: AirAsia Bhd, which is looking to raise about RM500mil from the private placement of 20% of its share capital, is targeting RM1bil cash reserves by year-end.

Group chief executive officer Datuk Seri Tony Fernandes said the RM1bil cash to be raised might or might not include the RM500mil from private placement, which the board approved yesterday.

“The RM1bil cash reserves will be achieved from various activities that include improving efficiency, increasing seat load factor and other expenses wherever possible,” he told a media briefing after the company’s AGM and EGM yesterday.

Fernandes said the fund raised from the private placement would be used mainly to reduce the airline’s gearing and help restructure its finances.

An analyst with TA Securities said post-private placement, AirAsia’s gearing ratio was expected to fall to 2.7 times from 3.7 times now, which is a key concern among investors on the stock.

A filepic shows an AirAsia aircraft at KL International Airport. Datuk Seri Tony Fernandes (inset) says the budget airline plans to raise funds to reduce its gearing and help restructur e its finances — AFP

On the airline’s fuel-hedging strategy, Fernandes said: “AirAsia is currently on spot fuel buying, which is now proven to be the right decision, and we’ve managed to unwind our fuel derivative contracts.”

On why the board did not equity-account the airline’s share of losses in Thai AirAsia Co Ltd (IAA), Fernandes said it was the advise given by auditor PricewaterhouseCoopers.

AirAsia deputy group chief executive officer Datuk Kamarudin Meranun said the company had wanted to equity account the losses of IAA into its books.

“But we were advised not to do so by our auditors as there were still some outstanding issues then relating to IAA’s former stakeholders Shin Corp and later Temasek Holdings,” he said.

On AirAsia eating into Malaysian Airlines’ market share, Fernandes refuted the claim. “We have not done so. In fact, we have opened up new routes to allow more people to fly at budget fares never done by any other airlines.”

On the dispute with Malaysia Airports Holdings Bhd over various outstanding charges, Fernandes said: “We are hopeful that the issue will be resolved in two weeks.”

Asked about AirAsia’s performance going forward, he said: “We expect to be profitable this financial year, which goes to say a lot for us, when most other airline companies are making losses in these challenging times.”

He also said AirAsia’s second-quarter results (which are soon to be announced) should be reasonable.

The budget airline recorded a net profit of RM203.15mil in the first quarter ended March 31, up 26% from RM161.28mil in the previous corresponding period.

AirAsia sees more than RM1b in coffers

Low-cost carrier AirAsia Bhd (5099) expects to have more than RM1 billion in its coffers by the end of the year, as it grows its profits and undertakes a private placement, says its chief.

“The cash will be used to lower the group’s gearing,” group chief executive officer Datuk Seri Tony Fernandes told reporters after the airline’s annual and extraordinary general meetings in Sepang yesterday.

In an announcement to Bursa Malaysia yesterday, AirAsia has proposed a private placement of up to 481.14 million new ordinary shares of 10 sen each, which could potentially raise gross proceeds of up to RM601.43 million.

The proceeds are based on an issue price of RM1.25 per placement share, representing a discount of 3.10 per cent to the five-day weighted average market price of AirAsia shares up to and including July 27 of RM1.29.

This will represent up to 20 per cent of the issued and paid-up share capital of AirAsia as at July 27 of RM237.56 million, comprising 2.37 billion shares.
“Our aim was just to raise some RM500 million to reduce our net gearing.

We have received interest from many local and foreign investors,” said Fernandes.
The placement will reduce the airline’s net gearing from 3.71 times to 2.56 times based on its unaudited accounts as at March 31 2009.

As much as RM68.76 million of the proceeds will be used to re-pay part of AirAsia’s interest-bearing borrowings.
When asked if the placement will be done in tranches, Fernandes said the group would rather place the 20 per cent altogether upon receiving the necessary regulatory approvals.

The private placement is expected to be completed by the fourth quarter of this year.

Meanwhile, the group’s current cash and cash equivalents as at March 31 2009 stood at RM223.99 million.
On the airline’s overall business, Fernandes said passenger growth was good for its second quarter ended June 30 2009, with a load factor of 76 per cent.

“We do hope to announce a positive second quarter and move towards a profitable full year,” he said.
AirAsia is expected to release its fiscal second-quarter results within the next two weeks.

It posted a net profit of RM203.1 million for its first quarter.
Fernandes also said that AirAsia is currently in discussions with Malaysia Airports Holdings Bhd over the outstanding airport taxes owed to the airport operator.

“The airport charges should be resolved in the next two to three weeks,” he said.
Fernandes also denied that AirAsia is eating into Malaysia Airlines’ (MAS) market share.

Rather, it has grown the domestic and regional air travel markets.
“The only way we have grown from 200,000 to 24 million passengers is by offering low fares and developing 44 new routes.

I can’t see how we can cannibalise when we start flying brand new routes not served by MAS,” he said.

AirAsia to sell 20% stake in $172 mln share placement

03 August 2009

KUALA LUMPUR - Southeast Asia's largest budget carrier, AirAsia (AIRA.KL), has finalised a plan to raise up to $171.6 million in a share placement to strengthen its balance sheet and increase its financing flexibility.

The airline plans to place out up to 481.1 million AirAsia shares, representing a 20 percent stake, to buyers to be identified later, it said in a statement to the stock exchange. "It (the share placement) will also reduce the current net gearing position of the company and its subsidiaries," it said.

Malaysia's No.2 bank, CIMB, is the adviser and placement agent for the exercise.

The amount to be raised is based on an indicative price of 1.25 ringgit per placement share, a discount of 3.1 percent to the 5-day weighted average market price of AirAsia shares up to July 27 of 1.29 ringgit, it said.

The stock ended on Monday at 1.54 ringgit.

The actual number of shares to be placed out will be determined after the airline obtains regulatory approvals, it said.