Friday, September 3, 2010

Air Asia Eyeing Halim Airport

31 August 2010

- The Ministry of State-owned Enterprises (SOEs) acknowledged that Malaysia-based airline Air Asia states its interest to patch up an airport in Indonesia. One of the targets is Halim Perdanakusumah Airport.

"They want to manage an airport, and the name Halim is out," said SOEs State Minister Mustafa Abubakar in Jakarta, August 31.

According to Mustafa, Air Asia was willing to oversee an airport in Indonesia but it could not yet reveal the prepared allocated investment.

In addition to Halim Perdanakusumah Airport, Air Asia also viewed that the Terminal 3 of Soekarno-Hatta Airport will need better management, for there is no balance between the domestic and international terminals.

In addition to Air Asia, Mustafa said that a number of airport administrators are eyeing several airports in the country, including one managing Schiphol Airport in the Netherlands.

The minister said foreign investors are starting to put into consideration the development of various airports, especially Soekarno-Hatta, which is more visible and profitable.

Antique, Syahid Latif

AirAsia X Launches Ex-Australia Promotion

31 August 2010

AirAsia X is slicing 20% off all Australian flights to Kuala Lumpur and back to celebrate the arrival of Spring.

AirAsia’s 20% Off Spring Sale is on from Wednesday, 1 September, until 5 September 2010, with 20% off all flights between the Gold Coast, Melbourne and Perth and the Malaysian hub of KL.

The travel period runs between 1 September 2010 and 14 November 2010. The sale also applies to AirAsia X’s new Premium FlatBed seats.

The Premium seats offer standard business class specifications of 20” width, 60” pitch and stretch out to 77” in full recline position.

They also feature universal power sockets, adjustable headrests and built-in personal utilities such as tray table, drink holder, reading light and privacy screen.

AirAsia X is also offering hot deals on some old favourites departing Kuala Lumpur including Ho Chi Minh from $3, Phuket from $5, Penang from $26, Langkawi from $30, Singapore from $32, Bangkok and Siem Reap from $67 and Bali (Denpasar) from $71. Terms and conditions apply.

Virgin Blue pax up in Jul-2010; AirAsia focuses on ancillaries; Thai Tiger revising business

30 August 2010

Shares in Virgin Blue gained 3.2% on Friday, the same day the carrier released its traffic results for Jun-2010 and Jul-2010.

The carrier reported a 7.3% increase in passenger numbers to 1.6 million (1.4 million for domestic operations and 283,500 on international services) in Jul-2010, with an average load factor of 81.6% (78.7% for domestic and 86.0% for international routes). This follows 1.5 million passengers in Jun-2010 with an average load factor of 75.4%.

Thai AirAsia, Indonesia AirAsia may convert debt into equity when listing

In other Asia Pacific LCC news, AirAsia CEO Tony Fernandes stated Thai AirAsia and IndonesiaMalaysia Business Times report on 30-Aug-2010. The collective debt of the two carriers is approximately MYR800 million. Mr Fernandes added that AirAsia’s 49% shareholdings in Thai AirAsia and Indonesia AirAsia would be diluted once they are listed. AirAsia may look to convert their debt into equity when they seek listing, according to a

Mr Ferndandes also said the carrier aims to increase ancillary income to USD19.14 (MYR60) per passenger in the next three years. Shares in AirAsia gained 1.9% on Friday.

Tiger financially strongest option for LCC JV

Also in the region, Thai Airways President, Piyasvasti Amranand, commented that the carrier selected Tiger Airways as its partner to launch LCC JV, Thai Tiger Airways, after looking at a number of options, including Jetstar, Dragonair, Cebu Pacific and Lion Air.

Mr Amranand said Tiger was selected as it is financially the strongest and the two airlines have the “same business concept” and “same enemy”. The two are now revising a business plan, to include regional and domestic routes. Mr Amranand said the carrier would not be losing aviation slots to Tiger Airways as a result of the JV.

Cebu Pacific yet to decide on timing for IPO

Meanwhile, Cebu Pacific parent, JG Summit Holdings Inc, stated it is yet to decide the timing of plans to launch an IPO for the LCC. The company said the timing of the offer would depend on approvals from the stock exchange and securities regulator.

Selected LCCs daily share price movements (% change): 27-Aug-2010

Source: Centre for Asia Pacific Aviation, Yahoo! Finance & Reuters

Motor racing-Lotus now fully focused on 2011 car

27 August 2010

Formula One newcomers Lotus are now fully focused on next season and taking on the sport's established teams, technical head Mike Gascoyne said on Friday.

The Malaysian-owned team are currently best of the three all-new outfits on the starting grid but are still some distance away from the other nine and a long way from scoring their first points.

Friday at the Belgian Grand Prix marked another milestone for the revived marque, returning after the demise of the original Lotus team in 1994.

"Today was the day a year ago that we actually first walked around our factory and there were three of us," recalled Gascoyne.

"Now there are 220 of us. We hope that we can do a better job for next year, so that is clearly where our focus is."

Lotus, run by AirAsia aviation entrepreneur Tony Fernandes, designed their first car in a hurry but Gascoyne said the 2011 one should be a far more considered effort.

"While it is still important for us to try and maintain 10th place in the championship, I think the most important thing as one of the new teams is that we make that step and close the gap to the established teams and we are able to race them properly," he said.

"I think just being on the grid for us was a huge achievement but you are only a new team once and we are not a new team next year. We are a Formula One team and we have to make sure that we are performing as one so we very much switched our focus on to next year's car."

Lotus's best result in 12 races so far has been 13th for Finland's Heikki Kovalainen in Australia in March.

The old Lotus team founded by the late Colin Chapman won seven constructors' titles between 1963 and 1978 as well as six drivers' crowns.

"Gearbox and hydraulics have been a particularly weak area," said Gascoyne of this season's performance.

"We haven't had the resources to put all the fixes in place and I think we have been let down by some suppliers who have not done as good a job as they should have done. But you cannot make excuses. You have got to put things right," he added.

"I think we are now very much on top of it."


Win Up to 100 Free AirAsia Flights

27 August 2010

AirAsia has launched a regional “Tell Us Your Story” promotion, which offers, until 4 October 2010, the chance to win up to 100 free flights.

The “Tell Us Your Story” contest is part of AirAsia’s regional Real People Real Stories branding campaign which is gearing up to celebrate AirAsia’s 100,000,000th guest flown.

Kathleen Tan, Regional Head of Commercial, AirAsia said, “From a humble beginning of two aircraft, one destination and a staff of 250 nearly nine years ago; AirAsia now has a fleet of 95 aircraft (and counting), over 130 exciting destinations and 8,000 staff globally. AirAsia has also been awarded the “World’s Best Low Cost Carrier” by Skytrax for two consecutive years in 2009 and 2010. For the past 9 years, AirAsia has redefined air travel across Asia, and not only made it possible for everyone to fly but helped to fulfilled dreams, create job opportunities, and changed the lives of nearly 100,000,000 people who has flown with AirAsia. The airline has been bridging communities in underserved markets such as Bandung, Banda Acheh, Trichy and Hat Yai which no other airline services. That is the AirAsia story in a nutshell, but it is now time for your story to be heard.”

Share how AirAsia has changed your life for the better in any form and submit it before 4 October 2010. You can blog about it, film it, tweet about it, or in any other creative ways you can imagine and stand a chance to win up to 100 free flights. Entries are encouraged to be tagged with the phrase AA100M.

New LCC terminal may have aerobridges

27 August 2010

Both MAHB and AirAsia are looking into it

PETALING JAYA: Aerobridges may be a feature at the country’s new low-cost carrier terminal (LCCT) for which the ground breaking is slated for Monday.

Malaysia Airports Holdings Bhd (MAHB) has proposed this facility and AirAsia Bhd is mulling over it.

“We have not used that before but it is a proposal and we will look at it. As long as our cost does not go up (too much) and we can still maintain the 25-minute turnaround time, we will be happy to have aerobridges.

“It would be for the comfort of passengers,” AirAsia Bhd group CEO Datuk Seri Tony Fernandes told StarBiz.

Now come rain or shine passengers have to walk up to board the plane(pic). At the new LCC terminal there may be aerobridges.

AirAsia has resisted aerobridges in the past as it needs to keep its cost base low to enable the airline to offer low fares to travellers. The challenge ahead would be to change with the times and offer comfort whilst still manage at low cost.

The ground breaking, to be witnessed by Prime Minister Datuk Seri Najib Tun Razak, will mark the construction of the new LCCT, which is expected to be completed in 2012.

The RM2bil terminal can handle 30 million passengers and will be close to the existing KL International Airport (KLIA) terminal. There will be 72 gates and a new dual-mode runaway that will allow for 25 minutes turnaround time and increase efficiency.

It is learnt that the LCCT will be modelled after KLIA. A joint venture between UEM Construction Sdn Bhd and Bina Puri Holdings Bhd will build the terminal.

Wanting to consider MAHB’s proposal for the aerobridges bodes well for the renewed friendship between the two which had a nine-year spat.

“We had a good meeting with MAHB recently and things are progressing the right way. We should finally, after 11 years, have a terminal that will propel our growth,’’ Fernandes said.

The new LCCT is an important step for the industry. Even though its construction has been delayed from its original completion date of 2011, Fernandes is no longer furious.

To him, an airport with better facilities and amenities is worth the wait. In the interim, the existing LCCT terminal will be extended to cater for growth.

“I think, after nine years, we have seen some good cooperation between us and huge economic benefits. We have discussed with MAHB the development of permanent LCCTs at Kota Kinabalu, Kuching and Penang. We also intend to use Langkawi much more.

“The next three to four years looks exciting for us. With the airport development, we expect to see tremendous growth potential. The new airport will make KLIA a premier hub in Asia and that augurs well for our business.”

MAHB managing director Tan Sri Bashir Ahmad could not be reached for comments.

It is unclear if the express rail link (ERL) will be extended to the new LCCT. Fernandes is proposing that KTM Bhd consider linking the new LCCT with its current network to give an alternative to travel from the north to south of the peninsula and at the same time, promote tourism.

By B.K.Sidhu

The Star

AirAsia celebrates the Spirit of Merdeka with Low Fares!

25 August 2010

Domestic fares from RM9* and international fares from RM29*

AirAsia, the leading and largest low cost carrier in Asia has more low fares coming your way with its Merdeka Sales campaign. Fares start from as low as RM9* to domestic destinations and from RM29 to international destinations. The Merdeka campaign is a tribute to all Malaysians in achieving 53 years of Independence.

Ultra low fares for the Merdeka Sales are available up to 12 days from 24 August - 5 September 2010. However, low fares are on first come first served basis and is offered exclusively online. The travel period for this Merdeka Sale promotion is from 3 January 2011 to 31 March 2011.

Travel from Kuala Lumpur to Langkawi, Alor Setar, Johor Bahru, Penang, Kota Bharu and Terengganu from RM29*; and to East Malaysia from as low as RM49*. Select from exciting destinations and sexy getaways such as Siem Reap, Bandung, Jakarta, Krabi and Saigon from RM69*, while many other destinations throughout China are also on sale with value-for-money fares.

Alongside the Merdeka Sale which runs up to 5 September, AirAsia is also holding a special Merdeka Sale for Indian destinations which is available for booking from 24 August - 12 September for the same travel period of the Merdeka Sale as well. Enjoy low fares to cities such as Bangalore and Hyderabad from as low as RM149*, while fares for Kolkata, Kochi, Hyderabad, Trivandrum, Trichy and Chennai (from both Kuala Lumpur and Penang) starts from RM199*.

Kathleen Tan, Regional Commercial Head, AirAsia Berhad said, "This is a month of celebration, both for our guests and AirAsia as well, as it is the Merdeka month for Malaysia and for AirAsia. It is a dual celebration as the airline is gearing up towards achieving our 100 millionth guests soon. AirAsia has been synonymous with its low fares and liberating air travel and we have always strive for the best and have been innovating products and services from time to time for the benefit of our loyal guests."

To further add value to our campaign, AirAsia X is also offering its destinations for the Merdeka Sale with fares from as low as RM199* to China (Tianjin), Taiwan, India (Delhi, Mumbai), from RM249* to Australia (Gold Coast, Melbourne,) and from RM699* to London. Guests may take this opportune deal to travel early next year for an adventurous or leisure trip across South East Asia and beyond with Kuala Lumpur as the gateway hub.

Azran Osman-Rani, CEO of AirAsia X commented, "We are proud of our country and having to celebrate Malaysia's 53 years of Independence proves how far we have strived thus far together as a nation. AirAsia X is no stranger in the Malaysian business scene, and we pride ourselves as being part of 1 Malaysia. Without the rakyat, we would not be where we are today. We thank the rakyat for their support and there's no other way than to offer our continuous low fares to our guests, in light of the Merdeka spirit. Guests may take this opportunity to plan for their next year travel and make use of both AirAsia and AirAsia X vast route network for a fantastic holiday venture over 132 routes to 70 hot destinations."

To add value, offers a selection of more than 70,000 hotels worldwide apart from personalized tour packages with unbeatable prices. Log on online and find out more on the various tour packages that will suit every budget.


Low dividend payout by AirAsia if any

24 August 2010

PETALING JAYA: While analysts approve of AirAsia Bhd’s move to pay dividends, they expect the dividend payout will not be significant yet.

The budget carrier, which has been listed since 2004, do not have a dividend policy. However, the group is now considering to pay dividend to its shareholders.

HwangDBS Vickers Research said that although the dividend payment was positive for AirAsia’s shareholders, it did not expect yield to be attractive, considering AirAsia’s huge capital commitment as it was still at its expansion phase.

A local analyst said although AirAsia could afford to start paying dividend, it need not do so as no one expected the airline to pay dividend.

“Its cashflows are okay but the questions is not about the decision to pay, but by what quantum. It (quantum) makes a difference, for example paying one sen – which still constitutes a dividend although it’s not material – and a payout which gives a decent yield such as 10 sen,” he added.

A bank-backed analyst concurred that AirAsia could afford to pay dividend based on its current cashflow but it would not be as significant yet. He added that investors could invest in dividend stocks such as British American Tobacco if dividend was what they were after.

“AirAsia is a growing company. Investors invest in AirAsia for its growth story. They could pay half a sen to one sen in dividend and it may be more symbolic in the next three years,” he added.

The analyst also said AirAsia needed to restructure its Thai and Indonesian units as both were currently leveraging on its balance sheet.

Another analyst said AirAsia was currently on an expansion phase and would required large capital commitment. Hence, its dividend yield would not be as attractive.

“I don’t think it will be that much. In terms of yield, it may not be that attractive,” she said.

Yesterday, a local daily reported group CEO Datuk Seri Tony Fernandes as saying the group was planning to propose a dividend policy by the third quarter of this year.

AirAsia has been mulling over a dividend for some time. In June, Fernandes said AirAsia was in a much better position to consider paying dividends to its shareholders after solving some issues within the group.

Although it has announced its intention to pay its maiden dividend, the carrier has not given any indication on when the first payout will be.

As at June 30, AirAsia has a short and long-term borrowing of RM7.58bil and a deposit, bank and cash balances of RM858.1mil.

“The borrowings are mainly in the form of term loans which are for the purchase of new Airbus A320-200 aircraft,” it said in notes accompanying its latest quarterly results.

For the quarter ended June 30, AirAsia posted a net profit of RM198.9mil for the three months to June 30, a 43% jumped from RM139.2mil in the previous corresponding period, on a turnover of RM940.6mil.

By Leong Hung Yee

The Star

AirAsia says hello to Hat Yai with inaugural flight from Kuala Lumpur

20 August 2010

AirAsia, the world’s best low-cost airline celebrates its inaugural flight to Hat Yai from Kuala Lumpur signifying AirAsia’s final connection to South Thailand with a 90 percent flight load.

Kathleen Tan, Regional Commercial Head, AirAsia says: “There has been a demand for AirAsia to connect Hat Yai to Kuala Lumpur, and we are excited to fulfill this demand of an unserved market. AirAsia is the only airline to connect Hat Yai direct from Kuala Lumpur with daily flights. This new route was opened for sale recently in June, and the response has been encouraging. With AirAsia’s vast network and excellent connectivity, travelers from Hat Yai can now connect all over the world via AirAsia’s regional hub in Kuala Lumpur to all ASEAN countries, China, India, Australia and Europe with ultra low fares. It will also be more convenient for frequent travelers to Hat Yai to fly instead of driving long hours, which will translate into more time for shopping and sightseeing at Hat Yai.”

“This route adds another significant milestone for us as it is AirAsia’s final connection to South Thailand, which reiterates our commitment to expand the ASEAN market. We recently completed our network to all ASEAN countries from Kuala Lumpur in July with our newly launched Kuala Lumpur to Yangon flight. With this new addition, AirAsia now has a total of 140 flights weekly from Kuala Lumpur to Bangkok, Chiang Mai, Krabi, Phuket and now Hat Yai,” Tan added.

AirAsia’s Thai affiliate, Thai AirAsia also flies to Hat Yai from Bangkok with 4 flights daily.


Flights From Departure / Arrival Flight No Frequency

KUALA LUMPUR – HAT YAI 1145hrs / 1200hrs AK 770 Daily

HAT YAI – KUALA LUMPUR 1235hrs / 1445hrs AK 771 Daily


Aviation: AirAsia retires the last Boeing

20 August 2010

As from today, AirAsia flies entirely Airbus aircraft. The airline says that using single make - with as few models as possible - increases efficiency in a number of ways:

- crew do not need to be trained on multiple aircraft types - a substantial cost for carriers with a mix of e.g. Boeing and Airbus and a range of different models and configurations

- the stock of spares required is much reduced, thereby cutting overhead and the risk that stock will become redundant and therefore significantly reduce in value

- servicing is cheaper: maintenance crews do not have to be trained on multiple aircraft and work more quickly because they work exclusively on one kind of plane.

AirAsia group inherited a mix of aircraft when it took over the airlines that became AirAsia Indonesia and AirAsia Thailand.

The Chief Officers' Network Aviation

AirAsia Q2 net profit 43% up on higher passenger load

19 August 2010

PETALING JAYA: AirAsia Bhd’s net profit jumped 43% to RM198.9mil for the second quarter ended June 30, from RM139.2mil a year ago, on the back of strong growth in passenger volumes, ancillary income and higher average fares.

Its revenue for the quarter was 26% higher at RM940.6mil from RM747.9mil a year ago. It reported earnings per share of 7.2 sen versus 5.9 sen a year ago.

For the six months ended June 30, AirAsia posted a net profit of RM423mil on revenue of RM1.82bil.

While AirAsia posted a record quarter, Malaysia Airlines posted a net loss of RM535mil due mainly to derivative losses from its fuel hedges. MAS’ revenue stood at RM3.2bil for the quarter ended June 30.

In a teleconference yesterday, group CEO Datuk Seri Tony Fernandes was confident of a strong second half for AirAsia. He sees a tremendous upside for its operations in Thailand and Indonesia while its ancillary income registered massive growth.

“Forward bookings are looking very good, The fourth quarter is traditionally our strongest quarter. To head into our strongest season on the back of a soaring first quarter and a record-breaking second quarter puts us in a fantastic position,” he said.

During the second quarter, the group’s core operating profit for the period was RM168.5mil, a 31% increase over RM128.4mil core operating profit achieved a year ago.

The core operating profit margin for the period was at 17.9%, 0.7 percentage point higher than the 17.2% core operating profit margin achieved a year ago.

“There were no unrealised translation gains in the quarter as gains from the slight strengthening of the ringgit were offset by losses from the change in the fair value of currency derivatives,” it said in the notes accompanying AirAsia’s financial results.

Commenting on its ancillary growth, Fernandes said: “We have actually reached our target of RM40 spending per pax that we set for the last quarter. We have unearthed a gushing revenue stream that can boost the bottom line and also serve as a buffer to rising fuel prices.”

He said baggage fees and AirAsia Cargo were significant contributors to ancillary income for the group.

Meanwhile, AirAsia’s associates Thai AirAsia Co and Indonesia AirAsia recorded good performance in the second quarter.

“Indonesia AirAsia has staged a strong turnaround and we expect greater things,” Fernandes said, adding that passenger volume grew by 10% year-on-year to 947,786 from 863,440 last year.

In the second quarter, Thai AirAsia recorded a net profit of RM4.9mil on revenue of RM267.4mil while Indonesia AirAsia’s net profit rose to RM39.6mil on revenue of RM233.2mil.

During the quarter, the group carried a total of 6.07 million passengers while the load factor increased to 77% from 75% in the same period last year.

Fernandes said its cost per average seat per km (ASK) of 3.62 US cents was mainly due to higher average fuel cost. He said the average fuel price in the second quarter was US$100 per barrel against US$60 a barrel in the same period last year.

However, its revenue ASK grew by 26% to 4.88 US cents in the second quarter from 3.87 US cents perviously. “I think we remained prudent with hedging, but it’s very useful too – that we’re not trying to bet where the market’s going, we’re just trying to match our forward sales with our oil hedging,” he said when asked on its hedging status.

Fernandes said its net gearing was expected to improved after the deferment of aircraft in 2011. “We have deferred seven A320s for 2011 to 2015. We are planning to reduce aircraft deliveries to 10-12 from 2012 onwards,” he said. He expected AirAsia’s gearing ratio to be below two times from 2011 onwards.

On aircraft financing, he said the financing for all the aircraft in 2010 was secured. As of June 30, the group has a total of 85 planes. Of the total, 50 planes are for Malaysian operations, while Thailand has 20 and Indonesia 15.

Fernandes was confident that the group’s cash balance would surpassed RM1bil by year-end. It has a current cash balance of RM858mil.

“We’ll easily surpass that by year-end. We will be getting re-payment from our associates in Thailand and Indonesia.” He added that with the listing of associates, the amount due from associates could potentially be converted to new shares to maintain shareholding in Thai AirAsia and Indonesia AirAsia.

“It is very premature for me to comment. We believe we have a very strong brand in Thailand. We are not duly concerned. We are not focusing on our competitor, but ourselves,” Fernandes said when commenting on Tiger Airways’ venture into Thailand.

Analysts contacted said AirAsia’s strong performance was above their expectation.

“They (AirAsia) did superbly despite the significant rise in the fuel bill due to the higher oil prices. And that’s largely thanks to the strong growth in ancillary income which sort of ‘offset’ the higher fuel expenses. The deferment of aircraft significantly reduces the debt burden, and should contribute positively to earnings via lower financing costs and better yields through higher loads,” an analyst said.

Another analyst said AirAsia’s operational numbers look very good and were slightly above his expectations.

By Leong Hung Yee

The Star

AirAsia reports 'record' 2Q results; SpiceJet up 20% in Jul-2010; Skymark holiday traffic soars 35%

19 August 2010

AirAsia, the Asia Pacific region’s largest LCC, has proven its staying power in a slow but recovering market in 2Q2010, turning in what it describes as a "record quarter" for second quarter revenues. The carrier commented that the result builds on the “momentum of its first quarter profits” and sets the stage for a “potentially dynamic” second half.

AirAsia reported a 43% increase in net profit in the second quarter (three months ended Jun-2010) to USD63 million, and a 25.8% gain in revenue to a record USD299 million, as a recovering economy boosted passenger traffic (+11% to 3.9 million for Malaysian operations), load factors (+2 ppts to 77%) and average fares (+8% to USD54.70). Profit before tax rose a more modest 4%, while EBTIDAR was up 9%.

AirAsia shares have risen by 24% since the start of the year, below Tiger Airways' 26.5% rise but outperforming the Malaysian benchmark KLSE's 8.3% increase. The carrier’s shares were down 1.8% ahead of the result.

In other AirAsia news, the LCC confirmed it is working with Sovico Holdings Joint Stock Company to develop a suitable structure for the proposed venture in Vietnam. It includes the option of AirAsia initially providing operational and management services to Vietjet Aviation Joint Stock Company for a prescribed period before an investment is made.

SpiceJet handled 540,000 pax in Jul-2010; load factor of 77%

Meanwhile, shares in SpiceJet slipped 0.3% yesterday. On the same day, the Indian Ministry of Civil Aviation reported that SpiceJet witnessed a 20.3% increase in domestic passenger numbers in Jul-2010 to 540,000, to be the fourth largest carrier in the domestic market, behind KingfisherJet Airways (782,000, +14.8%) and Air India (708,000, +21.6%). Overall domestic passenger numbers increased 13.5% to 4.1 million. SpiceJet load factors stood at 76.8% in the month. (815,000, -1.7%),

IndiGo receives approval to purchase 150 aircraft

In other Indian news, non-listed LCC, IndiGo, reportedly received approval from the Indian Government to purchase 150 aircraft over the next two to three years to be used on international services. The carrier will have completed five years of operations in Aug-2011 making it eligible to launch international services.

Tiger Airways shareholders sell SGD125m in shares

Meanwhile, Tiger Airways shareholders sold approximately SGD125 million (USD93 million) in the carrier’s shares, at a price of SGD1.90 per share. CEO, Tony Davis, Ryanasia Ltd and Indigo Partners LLC sold 65.8 million shares combined. Shares in the carrier slipped 1.0% yesterday.

Skymark pax soar over peak summer period

Meanwhile, Skymark shares soared 6.0% yesterday. The carrier witnessed a 35% jump in domestic passenger numbers over the peak summer vacation period, between 06-Aug-2010 and 15-Aug-2010, to 129,489 passengers, despite overall passenger numbers slipping 1% to 2.7 million.

Source: Centre for Asia Pacific Aviation, Yahoo! Finance & Reuters

AirAsia net profit up 43% for 2Q2010; Air New Zealand expanding services to Japan

19 August 2010

AirAsia (-1.8%) declined for Wednesday (18-Aug-2010) despite reporting a 43% year-on-year improvement in net profit for the three months ended 30-Jun-2010 to USD63.2 million. The result came as revenues rose 26% for the quarter to USD298.8 million, while the cost of sales rose 33.6% to USD167.2 million.

The Group also reported strong yields for the period, with revenue per ASK (RASK) for Malaysian operations up 15% to USD 5.03 cents. AirAsia Thailand reported a 8% rise in RASK, to USD 4.74 cents, while AirAsia Indonesia RASK was up 19%, to USD 4.74 cents.

CEO, Tony Ferndandez, stated forward bookings are “looking very good”, with the fourth quarter traditionally its strongest. As a result, the carrier is in a “fantastic position” heading into its strongest season, following improved results in the first and second quarters.

See related report: AirAsia perspective

See related CAPA Profile: Financial Results

Capital Group increases shareholding in Qantas

Qantas (+2.8%) ended the day higher after news The Capital Group Companies Inc purchased 28.9 million shares in Qantas for AUD71.1 million between 07-Jun-2010 to 16-Aug-2010, increasing its stake from 8.25% to 9.53%.

The carrier has been edging higher after improved financial results for FY2009-10 and talk of plans to expand operations as demand, particularly in business markets, returns.

Air New Zealand expands services to Japan

Air New Zealand announced during trading it has more than tripled the number of charter flights it will be operating from Japan to New Zealand this summer in response to a resurgence in demand from this high-spending tourism market. Between 26-Dec-2010 and 03-Apr-2011, Air New Zealand will operate 14 return charter flights to Auckland from nine departure points across Japan. General Manager Japan, Edward Overy, stated the carrier is deliberately focusing on new tourists from key regions across Japan including Nagoya, Fukuoka, Sapporo, Okinawa, Sendai, Kumamoto, Hiroshima, Miyazaki and Kagoshima. These visitors will complement those already travelling on Air New Zealand's 12 scheduled services from Tokyo Narita and Osaka Kansai each week. The charter flights will utilise 230-seat B767 aircraft.

Indian airlines report improved passenger numbers for Jul-2010

Kingfisher Airlines (+4.4%) advanced, despite the Indian Ministry of Civil Aviation reporting a 1.7% year-on-year decline in the carrier’s domestic passenger numbers for Jul-2010 to 815,000. The carrier had a load factor of 79.3% for the month.

The carrier reportedly plans to sign a codeshare agreement with British Airways in Sep-2010. Kingfisher is due to join the oneworld alliance in 2011 with BA, one of the alliance’s founders, serving as sponsor.

Jet Airways (-0.6%) slipped, despite reporting a rise in passenger numbers of 14.8% for the month to 782,000. LCC subsidiary, JetLite also experienced an improvement in passenger numbers, up 15.8%, to 308,000. Load factors were 73.8% and 76.6%, respectively.

SpiceJet (-0.3%) was also down. The carrier reported a 20.3% increase in passenger numbers for Jul-2010 to 540,000, while load factor totalled 76.8%.

See related CAPA Profile: Traffic and Capacity

Elsewhere, China Airlines (-2.1%) and Malaysia Airlines (-1.8%) ended the session in negative territory, while Skymark Airlines (+6.0%) was the day’s biggest gainer.

Asia Pacific selected airlines daily share price movements (% change): 18-Aug-2010

Source: Centre for Asia Pacific Aviation, Reuters & Financial Times

AirAsia faces battle against rival LCCs

18 August 2010

KUCHING: Thai AirAsia is expected to face a number of new potential rivals on its position as Thailand’s leading low-cost carrier (LCC).A joint venture of low-fare airline AirAsia Bhd (AirAsia) and Thailand’s Asia Aviation, Thai AirAsia is currently the sole low-cost airline operating both domestic and international flights from Suvarnabhumi Airport.

However, Thai Airways and Tiger Airways had announced earlier this month that they intended to start a new LCC in Thailand to compete against Thai AirAsia. The new airline, which will be 51 per cent owned by Thai Airways and 49 per cent by Tiger Airways, would be called Thai Tiger Airways (TTA) and operate from January or February next year.

CIMB Investment Bank Bhd (CIMB Investment) reported that the added competitive pressure from TTA was undoubtedly negative as it could force Thai AirAsia to lower its fares and give up several percentage points in profitability

However, the latter had the benefit of incumbency, a well-recognised brand, a wide and well-connected network through links with the larger AirAsia group in Malaysia and Indonesia, both of which provided for customer convenience and a larger fleet with greater economies of scale.

“As a result, we expect Thai AirAsia to survive the onslaught relatively well. TTA, on the other hand, must be prepared for at least two years of losses as it attempts to wrest market share through promotional offerings and heavy marketing,” said CIMB Investment in its research note.

From a balance sheet point of view, if the competition became too fierce and operating cash flow at Thai AirAsia turned negative, AirAsia might have to continue financing the working capital requirements of its Thai unit.

“In our view, an increase in financial support will probably be unnecessary given that a recapitalisation of Thai AirAsia is on the cards upon its listing, which is slated by mid-2011,” added the research firm.

However, the presence of TTA might reduce the valuation multiples realised by TAA on its initial public offering (IPO) and lower the value of AirAsia’s equity in TAA.

Furthermore, potentially lower profitability at TAA due to competition might also reduce its operating cash inflows and slow the pace at which TAA’s debt to AirAsia was repaid. AirAsia would probably be receiving only partial repayment from TAA, given that some of its working capital loan could be capitalised into TAA equity before the IPO.

Moving away from the Thai AirAsia story and to something more positive, AirAsia’s efforts to defer the deliveries of the A320s would significantly reduce capital expenditure (capex) levels and gearing ratios.

“This is positive because in just three years, we expect the net debt-to-equity ratio to fall from 2.61 times in financial year (FY) 2010 to only 1.84 times in FY12. The lower capex (capital expenditure) may also allow AirAsia to consider paying its maiden dividend sometime this year or next,” the research firm said.

Meanwhile, Indonesia AirAsia had been adopting a niche strategy of international routes as it could not effectively compete against larger rivals like Lion Air in the domestic market.

“With fewer aircraft allocated to Thai AirAsia and Indonesia AirAsia, the associates will be able to use their operating cashflow to pay down related-party debt owed to AirAsia, rather than accumulate rising amounts of unpaid aircraft leasing charges,” said the research house.

Conclusively, the aircraft delivery deferrals would enable AirAsia to move away from aggressive topline growth in favour of profit growth as slower capacity growth could help lift yield and load factor.


AirAsia X low fare promotion

16 August 2010

PETALING JAYA: Travelers are in for a real treat with the latest low fare campaign offered by AirAsia X.

The three-day campaign, from Aug 17 to 19 for travel from 1 April to 11 August, 2011, offers unbelievable low fares to all of its destinations except Korea.

Dubbed the X-traordinary low fare campaign, the offer is limited and available on a first-come, first-served basis and made exclusively online via and

Besides offering free seats to Mumbai and New Delhi with guests merely paying airport tax from as low as RM25 one way, the airlines is also offering fares from as low as RM499 to London.

Australian destinations such as Gold Coast, Perth and Melbourne are available from RM199 whilst fares to China are offered from as low as RM99 to Tianjin and Chengdu and from RM149 to Hangzhou.

The fare to Taiwan is also offered from RM149.

AirAsia X has also revamped its economy class seats with new ergonomical, reclineable seats at 31 pitch equipped with comfortable adjustable headrests.

Guests will also have the opportunity to experience the new comfortable flatbed Premium seats on AirAsia Xs brand new A330 and A340 aircrafts with premium low fares from as low as RM449 to India, from RM499 to Taiwan, from RM549 to China, from RM899 to Australia and from as low as RM2,249 to London.

Premium seat guests will get to enjoy the following premium complimentary product and services: Pick A Seat, Priority Check-in, Priority Boarding, Priority Baggage, Baggage Allowance, Combo Meal and Comfort Kit made-up of a pillow and a blanket.

AirAsia X chief executive officer Azran Osman-Rani said the promotion was the best opportunity for guests to maximize on the airlines extensive route network to travel to more places with its amazing low fares.

“Our aggressive promo campaign on both our economy and premium class seats will allow guests a better flying option and choice of comfort.

“With our rapid expansion plans, AirAsia X is committed and poised to position Malaysia and Kuala Lumpur as its dynamic capital, as Asia's biggest low-cost hub,” said Azran.

He added guests could start planning and booking their flights for their next year travel plans and take advantage of Kuala Lumpur’s status as a gateway to Asia, Australia and Europe and connect globally.

Those flying on the AirAsia X network are also offered fares from as low as RM1 from Kuala Lumpur to Penang, Alor Star, Johor, Kota Bharu, Singapore, Begawan and Hatyai among others.

The offer, for the travel period as same as the international routes campaign, was kicked off on Aug 10 and will end on Aug 19.

Guests can also get online hotel deals and tour packages via AirAsiaGo at where they have wide choice tours, activities and accommodation in over 70,000 hotels worldwide.

All fares quoted are applicable for one-way travel only and is inclusive of airport tax.

By Wani Muthiah

The Star

Thursday, September 2, 2010

AirAsia’s Q2 revenue expected to rise 16%

13 August 2010

KUALA LUMPUR: AirAsia Bhd’s revenue for the second quarter is estimated to rise 16% compared with the previous corresponding period and 4% higher quarter-on-quarter to RM928mil on higher fare and traffic, said stockbroking research company ECM Libra Investment Research.

It said this would make the first half revenue hit 50% of the budget airline’s RM3.6bil target for the current financial year ending Dec 31.

“Revenue is expected to be sustained at 21.5 sen per km in the first quarter of the current financial year, higher by 33% year-on-year. We expect overall cost/available seat kilometres to rise year-on-year to 11.5 sen/available seat kilometres mainly on higher jet fuel,” it said in a statement yesterday.

The company also said it expected AirAsia to record 5% year-on-year higher adjusted net profit of RM135mil (up 22% quarter-on-quarter), assuming that non-fuel cost remained unchanged on a quarterly basis.

– Bernama

AirAsia tickets sell like hot cakes

12 August 2010

PETALING JAYA: Over half a million AirAsia tickets were snapped up within a day when the airline’s “Mind Blowing Fare” promotion of RM1 per seat started on Tuesday.

AirAsia also recorded its highest number of sales in an hour, selling 36,871 seats, which is a 47.5% increase from the previous record of 25,000.

The campaign offers flights to selected domestic and Asean desti­nations at RM1, including Alor Setar, Johor Baru, Langkawi, Penang, Singapore, Bandung (Indo­­­nesia), Phnom Penh (Cam­bodia) and Krabi and Phuket in Thailand.

The RM1 fare is applicable for one-way travel only and does not include taxes.

AirAsia group chief executive officer Datuk Seri Tony Fernandes said the low-cost airline credited a newly implemented system for expanding its booking capacity.

“With the new booking system New Skies, AirAsia can now accept up to almost one million flight bookings a day,” he said in a statement yesterday.

Booking for the RM1 air fare campaign is open until Aug 15, 2010 and is valid only for travelling next year between April 1 and Aug 11.

When asked about the return ticket price, AirAsia communications executive Daphne Cheah said “our fares are based on a tier system.”

“We (AirAsia) might say return fares are from RM50, but if it’s all snapped up and people can’t find it, we would be branded liars.

“We try not to put return fares as it may mislead people,” she said, adding that AirAsia kept to its practice of displaying one-way fares.

The Star

AirAsia conquers Hong Kong with major branding campaign

10 August 2010

AirAsia, the world’s best low cost airline, which is synonymous to the word innovation, continues to paint Hong Kong skies red with a major branding campaign which includes a series of activities across Causeway Bay, Central, major beach areas and MTR trains.

The Hong Kong public can expect AirAsia giant floating billboards across major beach areas such as Stanley, Repulse Bay, South Bay and Clear Water Bay from 7 Aug with fun and exciting promoters at the beach clad with iPads for instant registration to sign up for AirAsia’s RedA!ert email and AirAsia’s Hong Kong Facebook Page. The public can also stand a chance to win a surprise from AirAsia when they snap photos with the AirAsia team throughout this campaign by the beach.

The AirAsia brand will be hard to miss with its exciting and vibrant billboards around Hong Kong. AirAsia is bringing its presence in Hong Kong to the next level as it flies to five sexy destinations in Asia – Sabah (daily), Penang* (daily) and Kuala Lumpur (3x daily) in Malaysia; as well as Phuket (daily) and Bangkok (2x daily) in Thailand with a total of 56 flights a week from Hong Kong.

*Flights from Hong Kong to the pulsating island of Penang will be increased to DAILY from 4x weekly effective 7 September 2010.

AirAsia offers an array of services which is world-class with affordable fares. The relatively young airline, who will be turning nine in December this year has been awarded the World’s Best Low Cost Airline by Skytrax for two consecutive years for both 2009 and 2010, which has been voted by over 18 million air travelers.

This branding campaign is also in conjunction with AirAsia’s gear-up to celebrate its 100,000,000th guest flown. The great 100 million guests milestone is proof that AirAsia caters to every market including locals and expatriates throughout the region, including Hong Kong.


AirAsia X notches record sales for Seoul route

10 August 2010

PETALING JAYA: Long-haul budget airline AirAsia X has set a new sales record for its new destination Seoul, South Korea, with over 80,000 seats snapped up.

The airline recorded over RM20mil in introductory sales for its RM99 fare to Seoul through bookings on its web portal, surpassing those for London, Melbourne and Taipei.

Flights on the new route between Kuala Lumpur and Seoul will start on Nov 1.

Its chief executive officer Azran Osman-Rani said the airline was thrilled about flying more tourists to Malaysia from Seoul, following the Government’s approval for its flight to Incheon International Airport.

“We are confident that the route will also deliver strong new passenger traffic, similar to the significant growth rates we have recorded for the Melbourne, Perth and London routes which grew by 41%, 66% and 31% respectively last year,” he said.

The airline, he added, expected over 100,000 passengers for its daily Seoul service in the first year of operation.

Azran said AirAsia X had also received overwhelming interest from the Korean public, who were keen to take advantage of the low fares it offered to travel to Malaysia during winter.

“Tourists from Malaysia and other neighbouring countries will also be able to enjoy South Korea during the winter season and opt for a skiing holiday as there are many ski resorts in the country,” he said.

Azran said the airline would also work with the Korea Tourism Organisation and Tourism Malaysia to launch campaigns and offer travel packages to lure in tourists from South Korea.

The Star

AirAsia launches Mega Sale Promotion

09 August 2010

AirAsia has launched a Mega Sale with promotional fares available for travel in 2011.

One-way fares from KL to Kota Bahru, Langkawi and Penang start from A$3 while flights from KL to Kuching, Miri or Sandakan are from just A$7 one-way; Krabi, Phuket or Phnom Penh are from A$10; Bangkok, Jakarta or Jogyakarta from A$14; and flights to Chiang Mai, Bali or Hanoi are available from A$29. Flights to Colombo, Bangalore or Shenzhen start from just A$48.

The booking period runs from 10 August to 15 August 2010 for travel between 1 April 2011 – 11 August 2011.

AirAsia X head of commercial Darren Wright said, “These deals provide one of the cheapest ways to get around Asia and see some amazing destinations ... For those who get in early these are some of the best fare deals on offer. A perfect opportunity to hop around Asia without breaking the bank.”

Wednesday, September 1, 2010

Teenager Nabil to drive Lotus Racing F1 car during testing

07 August 2010

KUALA LUMPUR: Malaysian karting prodigy Nabil Jeffri will get an insight into Formula One racing when he takes part in Lotus Racing’s aero test in the United Kingdom next month.

The 16-year old is currently competing in Formula BMW Pacific with Eurasia Motosport. It has been a good start to his motor racing career as he is placed fifth in the standings.

Taking part in the aero test will provide invaluable experience in motor racing.

NEW COMER: Datuk Seri Dr.Tony Fernandes (right) and Nabil Jeffri, the lotus Racing's new driver for testing, at the press confrance in Kuala Lumpur yesterday.Starpic by S.S.KANESAN)

Nabil’s stint with Lotus Racing is part of the AirAsia Asean Driver Development programme, which is aimed at providing youths in the region the chance to pursue their dream of becoming professional racers.

Lotus Racing principal Datuk Seri Tony Fernandes said yesterday that it was great to be able to provide the opportunity for a young driver like Nabil to get a taste of driving an F1 car and gaining experience through the programme.

“This programme is designed at offering young drivers the chance to hone their skills and as a platform for them to develop and compete against top class racers,” he said after announcing Nabil’s stint under the programme at a leading hotel here yesterday.

“Nabil has huge talent and we are confident that he will benefit from driving in the aero test. He is among the young drivers who we hope will make the grade in the future.”

Nabil, meanwhile, is excited at the prospect of driving for Lotus in the aero test.

“This is a big break for me and I must thank Lotus Racing for the opportunity. Driving the Lotus car will be a priceless exposure to F1 racing.

“I hope to get more such stints to help me develop as a top driver. I am also thankful for being a part of the AirAsia Driver Development Programme,” he said.

The Lotus Racing team drivers are Jarno Trulli and Heikki Kovalainen while Malaysia’s Fairuz Fauzy is the test driver.

Fernandes said that Nabil would be able to get a better insight into F1 by talking to and learning from Fairuz.

By S.Ramaguru

The Star

Tune Group to sponsor Premier League refs

06 August 2010

The Tune Group, the entertainment and leisure brand founded by the owners of low-cost airline AirAsia, has signed a six-figure deal to become official shirt sponsor for referees and match officials in the Premier League, Football League and FA Cup.

Tune Group: official shirt sponsor for Premier League match officials

The three-season deal will commence from the beginning of the 2010/11 season, which gets underway this weekend.

The partnership gives Tune Group access to 2,000 professional football matches, with an estimated cumulative global TV audience of more than three billion.

The partnership delivers a range of designation and promotional rights, including shirt-sleeve and training-wear branding on all professional match referees, assistant referees and fourth officials, branding and accreditation on all publicity material, the Professional Games Match Officials (PGMO) and all governing body websites, as well as match official and refereeing inventory.

Mike Riley, general manager of PGMO, said: "I’m very positive that our new relationship with Tune Group will further help the development of refereeing in this country and throughout the world."

Air Asia was previously the key sponsor for the PGMO, but the sponsorship has now moved to the parent group in an effort to make the brand, which also owns Tune Hotels and finance brand Tune Money, a more visible presence in the UK market.

Tune Hotels will open its first European hotel later this month in London, and is expected to follow this with rapid expansion of its chain in the UK and Continental Europe.

The Malaysian-based business is also responsible for a number of other major brands including AirAsia X, the world’s first low-cost, long-haul carrier, Formula 1 team Lotus Racing, and the Association of Southeast Asian Nations (ASEAN) Basketball League.

Mark Lankester, Tune Hotels Group chief executive, said: "We have seen how AirAsia and AirAsia X benefited from this sponsorship before, by establishing its brand in such a mature, competitive market as the UK. With Tune Hotels opening its first London property later this month, this sponsorship by Tune Group could not be more timely.

"Communicating to English football’s three billion viewers globally presents the Tune Group of Companies with a powerful global branding tool for us in enhancing our brand awareness, not only facilitating our regional expansions but, most importantly, connecting with our customers."

Formed in 2001 to improve refereeing standards, the PGMO group officiates across all the Premier League, Football League and FA Competitions. It is involved in the mentoring of 77 referees and 225 assistant referees.

Currently, PGMO has a knowledge transfer programme that benefits entire confederations, such as the Asian Football Confederation, which has a future referees project supported by PGMO, as well as individual football associations in Japan, Australia, New Zealand and Canada, which work in partnership with PGMO to improve the performance of their own officials.

By Mark Banham

Tiger Airway returns to profitability, AirAsia defers aircraft, Cathay forward bookings “very good

06 August 2010

Tiger Airways’ shares surged 4.2%, as the carrier reported a 45% increase in revenues in the thee months to Jun-2010 (to USD107 million), with a return to profitability at both the operating and net levels (to USD591,000 and USD1.4 million, respectively).Tiger Airways’ yields improve, but unit costs also up

Passenger numbers increased 39% in the period to 1.5 million, while average fares and revenue per ASK also showed signs of improvement, increasing 4.3% (to USD57) and 24% (to USD 4.74 cents), respectively. Cost per ASK, however, also increased, by cost per ASK up by double-digits (+16.6% to USD 4.71 cents, with ex-fuel and forex unit costs increasing 5.5% to USD 2.67 cents).

See related report: Tiger Airways 1Q2011 operating profit sees the LCC well under way to becoming a regional force

Deferment of aircraft boosts AirAsia shares

Shares in AirAsia soared 10% yesterday, to more than a 30-month high, buoyed by the carrier’s decision to defer the delivery of seven aircraft.

AirAsia Group CEO, Tony Fernandes, commented: “Our share price is beginning to show its true potential, but, once people start analysing properly after the second quarter, they will see even more value”.

While the market reaction was favourable, analyst commentary was mixed. Some analysts commented that the deferment would enable the LCC to optimise its fleet capacity while reducing capital expenditure and net gearing, while others saw the decision as allowing the market to absorb the available capacity.

ECM Libra Investment Research estimated the impact of the deferrals to be a 2.2% increase in FY2011 earnings per share as lower interest expenses and depreciation outweighs capacity cutbacks. However, FY2012 earnings per share will be reduced by 3.6%”.

Meanwhile, Kenanga Research commented: “Although the fleet expansion will be relatively less aggressive for FY2011, AirAsia could benefit from lower operating and fuel costs from this deferment and perhaps this will allow the group’s internal restructuring, such as listing of its associates, and solve the overhang issues in its balance sheet”.

Meanwhile, OSK Research downgraded AirAsia from “buy” to “neutral” as a result of the deferrals, with a target price of MYR1.60.

China Airlines, Eva Air rise after cross-strait flights report

Shares in China Airlines and EVA Airways gained in Taipei Trading yesterday, on reports that Taiwan and China Mainland would resume talks on additional cross-Strait services on 05-Aug-2010. EVA shares reached an intra-day high during morning trading, for the highest share price level since 03-Jul-2010, closing the day 6.8% higher, while China Airlines shares gained 0.5% by day-end, reaching its highest level since 26-Jun-2008 during intra-day trading.

See CAPA Hot Issue page on Cross-Strait Aviation.

Cathay forward bookings “looking very good”

Shares in Cathay Pacific gained 4.5% in Hong Kong trading yesterday, the biggest gain in almost eight months, after CEO, Tony Tyler, commented that reservations are "looking very good" as a rebounding economy revives travel demand. Mr Tyler said: “We can look forward to the next six months with some confidence. Forward bookings are looking very good for the rest of the summer. Cargo is looking good for the rest of the year”

Asia Pacific selected airlines daily share price movements (% change): 05-Aug-2010
Source: Centre for Asia Pacific Aviation, Reuters & Financial Times

Deferment of aircraft boosts AirAsia shares

06 August 2010

PETALING JAYA: AirAsia Bhd’s stock was one of the flavours of the day yesterday, buoyed by its decision to defer delivery of seven aircraft, a move deemed favourable by analysts.

Analysts believed the delivery deferment would allow the budget carrier to optimise its fleet capacity while reducing capital expenditure and net gearing. As at March 31, AirAsia’s net gearing stood at 2.25 times.

Shares in the carrier jumped to more than a 30-month high yesterday, appreciating 15 sen, or 10%, to RM1.65. It was also one of top gainers and the third most active counter with 33.5 million shares traded.

“Our share price is beginning to show its true potential but, once people start analysing properly after the second quarter, they will see even more value,” group chief executive officer Datuk Seri Dr Tony Fernandes said in his Twitter post yesterday.

On Wednesday, AirAsia announced that it had deferred the delivery of seven Airbus A320s to 2015 from the original delivery period next year as it expected infrastructural constraints with the current airport facilities.

The seven planes are now due for delivery from April to November 2015 from the original March to October 2011.

AirAsia said slowing the deliveries would allow it to optimise its fleet and avoid costs associated with leaving the aircraft idle or underutilised due to infrastructural limitations.

Analysts said AirAsia might have doubts that the new low-cost carrier terminal (LCCT) would be completed on schedule, hence the deferment. They said more importantly, AirAsia’s aircraft deferral would not involve any penalty.

While some analysts agreed with the company’s reasons to defer given the uncertainties over completion of the new LCCT, they said the deferment might allow the market to absorb the available capacity.

“AirAsia has been very aggressive with the latest route to Seoul, South Korea. Deferring the aircraft will let the market absorb the capacity available first,” an analyst said.

ECM Libra Investment Research said based on its assumptions, earnings impact to AirAsia (which does not equity account its associates) was likely to be minimal.

“We estimate that the deferment will result in a 2.2% increase in FY11 (financial year ending Dec 31, 2011) earnings per share as lower interest expense and depreciation outweighs capacity cutbacks. However, FY12 earnings per share will be reduced by 3.6%,” it said.

AirAsia is expected to release its second quarter results on Aug 18.

The International Air Transport Association expects global airlines to post a profit of US$2.5bil in 2010 from a loss of US$2.3bil last year and say Asian carriers should do well.

“Although the fleet expansion will be relatively less aggressive for FY11, AirAsia could benefit from lower operating and fuel costs from this deferment and perhaps this will allow the group’s internal restructuring, such as listing of its associates, and solve the overhang issues in its balance sheet,” Kenanga Research said.

It added that with the deferment, the earnings growth for FY11 would depend on yield play and further cost efficiency on the back of growing demand for low-cost carriers in the improving airline industry.

By Leong Hung Yee

The Star