Is it necessary to buy travel insurance before flying?

15 September 2010

PETALING JAYA: It is hard not to notice that travel insurance is being offered whenever one books one’s tickets with an airline company. These days, air tickets come with an offer for travel insurance.

However, some travellers often ask if it is necessary to buy travel insurance when purchasing the air tickets. Well, if any airline can guarantee, among others, that your plane will be on time, your luggage will arrive safely on the same flight or you will not meet with an accident, then it is not necessary to purchase travel insurance.

For many though, travel insurance has eased the pain of cancelled flights, delayed travel and interrupted trips as witnessed recently with the Icelandic volcano eruption that caused havoc on international flights around the world and threw hundreds of thousands of travellers into a state of stranded chaos.

On the local front, both Malaysia Airlines (MAS) and AirAsia Bhd currently offer travel insurance purchase for customers buying air tickets via their web portals.

Johan Aris Ibrahim ...’By the end of 2010, AirAsia Insure will be available for most of our destinations.’

In 2008, MAS was the first full-service carrier in Asia to offer its travel insurance online. The MHinsure policy provides travellers comprehensive insurance coverage for unexpected losses during their journey with access to Mondial Assistance’s 24-hour worldwide assistance.

According to MAS general manager business development Visva Sabaratnam, the scheme has been well received with 25% of the carrier’s passengers purchasing it.

He said the comprehensive policy included overseas medical expenses, travel delays, trip cancellation, loss of baggage and personal effects, and home protection in case of damage to the home during the travel period.

“We promote MHinsure on our website, call centre and ticketing offices, From the response thus far, there is certainly good awareness of this service.

“We also see an estimated 30% of international policy holders who have purchased MHinsure more than once in 2009, indicating satisfaction with the product offerings and services provided, including claims experience,” he told StarBiz.

Apart from MAS passengers, those departing from Malaysia, Singapore and Australia on any other airline can purchase MHinsure from these countries on the MAS website.

MHinsure is currently available in Malaysia, Australia, Germany, France, Italy, the Netherlands, Singapore and Sweden, and was recently introduced in the UK, United Arab Emirates and New Zealand.

With this, a total of 11 countries in the MAS network now offer online travel insurance. According to the MAS website, travellers need only to complete the online travel insurance application to be eligible for cover. There is no need for medical examination. MHinsure also offers travellers the same premium regardless of age. The premiums are based on travel duration and destination.

Commenting on its competitiveness, Sabaratnam said MHinsure was developed with the primary objective of ensuring high quality cover at affordable prices.

MHinsure Basic Plan starts from RM15 for domestic travel for a 30-day cover and RM23 for international cover for a five-day trip.

Sabaratnam said whichever international cover customers chose, MHinsure offered customers unlimited financial coverage in the case of an overseas emergency evacuation or repatriation. “This sets us apart from the rest.”

Meanwhile, AirAsia head of financial services and loyalty Johan Aris Ibrahim said AirAsia started selling travel insurance online in 2005 and the recent rebranding of its insurance product as AirAsia Insure from Go Insure had boosted public awareness on the offering.

“The rebranding exercise was prompted by AirAsia’s plans to expand the insurance services regionally and to reinforce its position as the only Asean low-cost carrier to offer travelling insurance coverage,” he told StarBiz.

He said the response had been “positive regionally” and guests were starting to be insurance-conscious when travelling, whether for business or leisure.

“We have gone from strength to strength in offering AirAsia Insure and the number of policies sold has been growing at 30% annually,” Johan said.

AirAsia’s plan starts from RM7.50 for the AirAsia Insure one-way cover for domestic travel to RM49 for AirAsia Insure return cover for international travel (11-30 days).

“Besides Malaysia, AirAsia Insure is available for travel from Singapore, Thailand, Indonesia, Macau, Hong Kong, China and Australia,” Johan said.

“By the end of 2010, AirAsia Insure will be available for most of our destinations and at our affiliated companies for purchase at AirAsia Megastore.com, AirAsiaredtix.com and AirAsiaGo.com.

“There is an option to purchase insurance online as a notification or prompter will alert customers on AirAsia Insure when they buy their tickets online. We have invested in strategic and targeted advertising and promotion activities,” he said.

Airlines aside, travel insurance is also offered by travel agencies, banks and insurers. In addition, credit card issuers often issue complimentary travel insurance policies to cardholders that charge ticket purchases to their cards.

By Leong Hung Yee

The Star

AirAsia X opens tickets to Tokyo from next week

15 September 2010

Airline will be first foreign low-cost carrier serving Haneda airport from Dec 9

PETALING JAYA: AirAsia X will begin flights to Haneda airport in Tokyo on Dec 9 and open ticket sales for the sector next week.

The airline plans to mount three weekly flights and it will be the first foreign low-cost carrier serving the airport that is expected to open for international flights in late October.

Asashi newspaper in Japan reported that AirAsia X was expected to price fares far lower than those charged for existing services between the capitals of Japan and Malaysia offered by Japan Airlines and Malaysia Airlines (MAS).

Azran Osman-Rani says flying to Tokyo would be ‘super exciting.’

AirAsia X chief executive officer Azran Osman-Rani declined to reveal any pricing when contacted yesterday by StarBiz. But the market is abuzz with talk that the introductory price could range from RM99 to RM199.

Azran said that flying to Tokyo would be “super exciting as finally people will have choices and low fares to go to great places.’’

Three flights per week may be too few for AirAsia X but for now the airline does not have much of a choice.

It is learnt that the Japanese authorities had accorded seven rights and the Malaysian authorities awarded three each to AirAsia X and MAS, and one to Transmile.

“Japan is a high fixed cost city and with so few flights it would be difficult to make the sector sustainable so we will have to convince the authorities to grant us daily flights,” Azran said.

MAS will introduce three flights a week between Kota Kinabalu and Haneda from Nov 15.

Haneda airport is the main domestic hub for Tokyo but due to congestion in Narita, it will start receiving international flights next month. Haneda is just a 20-minute monorail or cab ride from downtown Tokyo whereas Narita is at least an hour’s train ride, and the trip can take over two hours by car on clogged roads.

To beat potential competition from six foreign low-cost carriers from China and South-East Asia, both Japanese carriers – Japan Airlines and All Nippon Airways (ANA) – want to set up low-cost airlines.

ANA has inked a deal with Hong Kong’s First Eastern Investment Group to set up a new airline that will start operations in the second half of 2011. ANA will own 39% in the venture and Far Eastern 33%. The balance equity will be sold to other investors.

By B.K.Sidhu

The Star

AirAsia slashes 20% off all seats, all flights

14 September 2010

AirAsia is slashing 20% off all seats on all flights for bookings made from 14 – 19 September 2010.

Guests are able to enjoy this special promotion for the immediate travel period from 20 September – 15 November 2010.

Be spoilt for choice when selecting your dream destination as all flights and all destinations are included in this promotion. Fly to Europe, Australia, China, India, the whole of South East Asia and all over Malaysia for 20% less.

Kathleen Tan, Regional Head of Commercial, AirAsia said: “We decided to have a 20% slash off as we feel that AirAsia guests deserve to have low fares to all the destinations we service globally to experience the vast connectivity of our route network.”

Discounted fares on already ultra low fares for flights will enable guests to use the savings for accommodation and activities at their holiday destinations. AirAsiaGo provides guests with value-for-money choices on over 70,000 hotels and more than 5,000 tours and activities worldwide.

IndianExpress.com

AirAsia X still in talks to start Paris route

09 September 2010

'It is still premature (to set a date), it is definitely not this year,' AirAsia X's chief executive officer Azran Osman-Rani said. -- PHOTO: AP

KUALA LUMPUR - LONG-HAUL budget airline AirAsia X said on Thursday it has no plans to begin flights to Paris this year, according to a top official, after French reports it had been given a slot at Orly Airport.

French media had reported that the carrier, which will operate the route after its affiliate AirAsia won landing rights in October last year, has been given a slot at the southern Paris airport starting from next month.

'We are not looking at flying to Paris on October 31,' AirAsia X's chief executive officer Azran Osman-Rani told AFP.

'It is still premature (to set a date), it is definitely not this year,' he said, adding that the carrier was still in talks with the French authorities on 'operational matters'.

French newspaper La Tribune, without specifying its source, reported that AirAsia has been given a slot to operate the Kuala Lumpur-Paris route twice a week from October 31.

The paper said the airline however intends to start these flights in 2011 and was targeting to fly four times a week. -- AFP

StraitsTimes

AirAsia X Appoints Carat Korea

09 September 2010

Woohyun Nam, General Manager of Carat Korea, announced today the agency has won the AirAsia X account following a pitch against incumbent Group M.

Carat Korea will become the hub for the client to design integrated communications planning, including media buying, detailed media planning of offline, outdoor and digital.

Carat Korea is able to offer the client a communications strategy that goes beyond a typical media execution, together with a strategic direction integrating online and offline.

“We were very impressed with the Carat team’s understanding of the market insight and their passion for our business. We know Carat will be our key partner to grow our business in South Korea,” said Spencer Lee, AirAsia X Marketing Manager.

Woohyun Nam added, “ I believe it is a great opportunity to partner with AirAsia, who have been named the world’s best low cost airline. Carat Korea will utilise the experiences of previous global brand launches such as H&M to achieve success for AirAsia.”

AsiaMediaJournal

CAE awaits first Air Asia MPL class in Dallas

08 September 2010

CAE is expecting its initial multi-crew pilot license (MPL) class to arrive in Dallas this month or in October to start the intermediate portion of the 56-week programme.

The twelve candidates are part of beta class designed to train crews starting with zero initial flight time for positions with Asian low-fare carrier, AirAsia.

Upon completion of the programme, the trainees are expected to receive an MPL license from Transport Canada and Malaysian authorities, after which they will enter AirAsia's initial operating programme for Airbus A320 first officers. AirAsia and CAE announced the program in February.

The 12 candidates are currently finishing the second phase of the four-phase programme, which included basic flying skills and 70h of single-engine flight time in Moncton Flight College in Canada. During phase two, the group will spend six months in intermediate training at CAE's SimuFlite centre in Dallas, which will include training in a twin-engine Beechjet 400 business jet flight training device.

The fourth and final phase of the programme will take place at CAE's headquarters in Montreal, where the students will train in an Airbus A320 full-flight simulator.

The programme is expected to be complete in March or April 2011.

By John Croft

FlightGlobal

AirAsia runs exclusive ‘Two to Go’ promo via its social media platform

08 September 2010

AirAsia, the world’s best low cost airline which has surpassed half a million fans on its Facebook page, continues to strengthen its social media channels with an exclusive ‘Two to Go’ promotion.

Offering guests two seats for the price of one, this incentive is made available until 8 September 2010 is for the travel period from 14 September – 15 November 2010.

Whether you are a beach bummer, an adventure seeker or a shopaholic, this is a promotion not to be missed. A wide selection of domestic and international destinations inclusive of Perth, London, Chengdu, Mumbai, Delhi, Bandung, Hat Yai, Colombo, Hong Kong, Jakarta, Kota Bahru, Langkawi, Terengganu and many other destinations from as low as RM19*.

Guests can also take advantage of the immediate travel period of this promotion to enjoy a quick getaway during the upcoming Hari Raya holidays.

AirAsia continues to reward its fans for their support with exclusive promotions via its social media platforms. This is the third time AirAsia has embarked on such initiatives to give exclusive value to all their Facebook Fans.

Guests can also receive real time updates on our latest promotions, events and other AirAsia-related information via Twitter (www.twitter.com/AirAsia) and the AirAsia blog (www.blog.airasia.com).

Peanuts!Low Cost

TAA taps Chiang Mai for northern hub

08 September 2010

Thai AirAsia will make Chiang Mai its third hub, after Phuket and Suvarnabhumi airports, as the no-frills carrier creates an additional sub-network to complement its expanding coverage.

The Chiang Mai hub, through which the airline will operate direct links with other destinations in Thailand and overseas, is due to be up and running in January.

The airline, part of Asia's largest low-cost carrier group, will inaugurate its northern hub with three routes, from Chiang Mai to Hat Yai, Bangkok and Singapore, all with daily frequencies.

Thai AirAsia chief executive Tassapon Bijleveld said that establishing services directly out of Chiang Mai would enable the carrier to exploit untapped traffic opportunities, especially in the leisure sector.

"By offering non-stop flights between Chiang Mai and other destinations, we'll encourage more people to fly more conveniently with less time, cost and hassles involving flight connections," he said.

The creation of a new hub will be made possible by the delivery in January of a new A320 jet from the European planemaker Airbus. The twin-engine, single-aisle 180-seat jet, Thai AirAsia's 20th, will be based at Chiang Mai International Airport.

Thai AirAsia launched Phuket as its second hub in 2009 in a strategic move to open up a new market, bypassing the traditional route that goes through Bangkok's Suvarnabhumi airport.

Today, the airline operates frequent services out of the Thai southern resort island to seven cities: Bangkok, Chiang Mai, Udon Thani, Hong Kong, Jakarta, Singapore and Kuala Lumpur.

In May, Thai AirAsia suspended flights from Phuket to Ho Chi Minh City in Vietnam and Medan in Indonesia, as traffic demand has been lower than expected. These flights began last December.

On Oct 12, the airline will start a new route, Phuket-Udon Ratchathani, with three flights a week, on Tuesday, Thursday and Saturday.

Sixteen of Thai AirAsia's current fleet of 18 A320s operate through Suvarnabhumi with two based in Phuket.

It is taking delivery of its 19th A320 next month as it continues to aggressively expand domestically and regionally with the launch of long-awaited flights from Bangkok to Indian cities such as Mumbai, New Delhi and Kolkata, possibly in the fourth quarter.

Other major Thai cities including Hat Yai and Udon Thani are candidates for Thai AirAsia's next hub, though Mr Tassapon did not give a time frame for its establishment.

Bangkok Post

Kingfisher shares soar following BA codeshare announcement; AirAsia to float AirAsia X

07 September 2010

Several Asian stock markets advanced for a fourth consecutive session on Monday, with the Nikkei Stock Average (Tokyo) rising 2.1%, the S&P/ASX 200 (Sydney) adding 0.8%, The Sensex (Mumbai) gaining 1.9%, the NZX 50 (Wellington) increasing 1.2% and the Wintek (Taipei) soaring by the daily 7% limit. The stock market advances occurred following better-than-expected US job data which eased economic concerns and buoyed Wall Street on Friday.

Kingfisher Airlines was the best stock of the day, jumping 8.8% after the carrier signed a codeshare agreement with British Airways, and British Airways CEO, Willie Walsh, commented its future oneworld member partner was “clearly the best partner” in India.

Mr Walsh, who stated the carrier has a list of 12 potential takeover takeover targets, added that if the Indian Government amends its Foreign Direct Investment (FDI) legislation “all airlines around the world will look at the possibility to invest in Indian carriers”, adding, “I have no doubt Indian carriers would welcome such foreign investment because airlines are looking at strengthening their financial position.”

Meanwhile, Davy Stockbrokers commented: "I would say Asia is number one in the [BA] context that it's a high-growth market. India is very important for them and I suspect Kingfisher is top of the list."

Meanwhile, KSEMA Fincon recommended Kingfisher Airlines as a good stock to buy in the upcoming six months, while SMC Global Securities commented that Kingfisher “can be a good stock to look for” at a target price of INR78, commenting: "Kingfisher is in the backdrop of their debt restructuring … Once the debt is removed and the restructuring efforts are successful then the company's efficiency levels and their profitability levels will significantly go up and because of this debt levels, even the stock has remained under pressure for quite some time and going forward, there can be a good strong relief rally in the stock."

Also gaining strongly was Jet Airways (+5.6%), while on the other end of the spectrum, Tiger Airways’ shares declined 2.0%.

Thai Transport Ministry summons Thai Airways to explain LCC JV agreement

Thai Transport Ministry has summoned Thai Airways to explain its agreement with Tiger Airways to jointly launch LCC, Thai Tiger Airways. The carrier will answer questions from the Ministry on 15-Sep-2010, with the Ministry claiming the carrier is yet to clarify some of its issues of concern. Transport Minister, Sohpon Zarum, has insisted Thai provide full details of the JV and has stated that if the agreement is found not useful or lawful, it would be halted.

AirAsia confirms plans to float AirAsia X

In other Asia Pacific LCC news, AirAsia CEO, Tony Fernandes, commented that the group plans to float AirAsia X as he is seeing “a bit of contamination” between the way AirAsia and AirAsia X are operated.

The carrier will list in Malaysia and possibly in London or New York. The CEO declined to disclose how much of the business will be sold to outside investors, but stated AirAsia's 16% stake in AirAsia X would be “treated as an investment” and sold down gradually. However, the two airlines will not be fully separated and will continue to share a website. Four executives, including Mr Fernandes, will remain on a board for both carriers. Shares in AirAsia gained 1.1% yesterday.

Asia Pacific selected airlines daily share price movements (% change): 06-Sep-2010

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

Airlines leverage on social media sites

06 September 2010

Carriers stir interest in travelling, do promotions and even sell tickets

PETALING JAYA: As travellers become more Internet and social media-savvy, airlines have started to leverage on social media sites for branding, promotion and marketing.

Airlines including Malaysia Airlines (MAS), AirAsia Bhd, Singapore Airlines, Cathay Pacific and Delta Air Lines are using Twitter, Facebook, YouTube, Flickr and even blogs to market themselves and engage with the public.

Some airlines turn their Facebook page into a fan page whereby they can connect with their fans on the Internet. Some promote their business, products, and new offerings on Twitter to reach out to more people.

MAS senior general manager, commercial strategy, Dr Amin Khan said the carrier had a two-pronged approach for its Facebook and Twitter accounts.

“For Malaysia Airlines Travel on Facebook, @MAS Twitter account and blogger engagements, our primary objective is to inspire travel by engaging and building a connection with our fans and followers.

“Our efforts here are focused on engaging our younger audience and customers, around 20 to 35 years old. This includes promoting our fares and deals, destinations, travel stories and competitions,” he told StarBiz.

Amin said MAS started its social media outreach including the Malaysia Airlines Travel on Facebook in March 2009.

“To date, we have more than 125,000 fans on Malaysia Airlines Travel on Facebook and some 16,500 followers on @MAS Twitter account.”

He added that the MH Deals by Malaysia Airlines on Facebook, which started in January, had 37,000 fans and it had 3,500 followers on @MHdeals Twitter account.

“We also have 11,500 fans on MH Students Facebook pages. A majority of them are students who are currently studying in Australia, New Zealand, Japan and India.”

MAS has managed to generate great interest with its lunch hour sales on Facebook.

“The idea for the lunch hour sale came from our Facebook fans. We are constantly engaging with them to get their feedback on what they would like to see. We are also planning other promotions according to ticket availability and seasonality,” Amin said.

A quick search on Twitter revealed that AirAsia has one of the most followers on its Twitter account with some 50,086 followers.

The budget carrier had previously operated under AirAsiaDotCom on Twitter. However, last Friday it announced to its followers that it had managed to secure back its @AirAsia twitter handler.

AirAsia has 478,708 fans on its main Facebook site. On top of the country specific sites that AirAsia has on Facebook and Twitter, it has a dedicated AirAsia YouTube channel, AirAsia Blog: Just Plane Thoughts and Flickr account as its official gallery of AirAsia pictures.

Media specialists see social media as a great platform to get the online community involved, to motivate them to travel, get them to spread the word on which airline to use.

“Most of these airlines make use of Twitter to introduce new events, offer a limited number of air tickets at discounted prices, etc,” a media specialist said.

She added that airlines were beginning to use social media productively. “Facebook is an excellent way to engage customers. And both MAS and AirAsia are doing it well.”

She said both carriers managed to encourage their customers to engage with one another. “They made it easy to access the airlines and build relationships. Potential customers can also ask questions and get help. If their customers are happy, it means returning customers to the carrier.”

She said it was good to note that AirAsia had managed to put links on its websites to generate interest on its Twitter and Facebook pages and vice-versa.

“It (AirAsia) manages to interact well on Facebook. Every news item it posts seems to get feedbacks and there are heaps of praises from fans.”

Last month, US-based Delta Air Lines had introduced the Delta Ticket Window, a Facebook application that allows its fans to find, book and share flights via the “Book a Trip” tab on its Facebook Page.

The carrier believes it can capitalise on a captive audience given that Facebook is the most trafficked website on its inflight WiFi service. It is a cutting edge offering for the airline which is unparallelled by other airlines.

Asked if MAS would start offering such service, Amin said its offerings would tie in closely with its digital strategy. “For example, we are revamping our MASTraveller portal as part of our strategy to inspire travel. In line with this, our Facebook and Twitter accounts will be promoting destinations and encouraging user-generated content.”

“We also have a social media feature on MHmobile. After a customer books his ticket on flymas.mobi, he will be able to share his itinerary on his own Facebook page, Tripit or Dopplr. This ensures that all his friends are aware of his travel plans, and he is also able to make other travel arrangements such as hotel bookings and car rentals via Tripit or Dopplr,” Amin said.

Amin said all its channels were focused on attracting consumers to its main website, www.malaysiaairlines.com. MAS employee bloggers also share their experiences on its official blog.

The carrier has a team managing the Facebook pages and Twitter accounts beside traditional media and other digital initiatives such as the website, applications for our mobile site, flymas.mobi, mobile gadgets and others.

by Leong Hung Yee

The Star

Freak accident kills Air Asia staffer at Hyderabad airport

05 September 2010

Retracting aerobridge traps Guest Services Officer's hand

A Guest Services Officer of Air Asia, Amritha Roy, died after her hand got trapped in a retracting aerobridge at the Rajiv Gandhi International Airport (RGIA) at Hyderabad on Sunday morning.

Ms. Roy, aged 24, had ensured that the Air Asia passengers bound for Kuala Lumpur boarded the aircraft and was on the aerobridge number 55, when the operator began bridge retracting operations. Ms. Roy’s hand got trapped in the telescoping aerobridge.

“She immediately collapsed out of shock and was rushed to Apollo Medical Centre at the airport for emergency medical attention,” an airport press release said later. She was declared dead by doctors.

The airport police have registered a case of death due to negligence (Sec. 304-A) based on a complaint by the Airport Manager Suraj. Airport Station Police Inspector R Sanjay Kumar said the police would investgate the incident and the aspect of negligence. However, no one has been cited as accused in the FIR, he added.

P. Sripathy, CEO of RGIA in Hyderabad said, "The airport authorities have formed a committee headed by Deputy CEO and comprising the Chief Operating officer of Delhi Airport and Chief Security Officer at Hyderabad Airport to investigate the incident and ascertain complete facts of the case."

“The incident is most unexpected in nature and it is very unfortunate. We deeply condole her death and our prayers are with her family”, the airport press release added.

Ms.Roy hails from Kolkata. Her body is being sent there, airport sources said.

K. Srinivas Reddy

The Hindu

Hedging of jet fuel

04 September 2010

PETALING JAYA: To hedge or not to hedge? The medium-term volatility of oil prices is giving the aviation sector a headache.

While hedging is an instrument that airlines can use to mitigate the impact of rising jet fuel costs, it is becoming increasingly difficult to rationalise the use of such an approach given the downward risk of global crude oil prices.

“The oil price volatility is one, an airline’s limited resources to invest in such an activity is another,” an analyst with a foreign research company said about challenges that airlines face today in getting their hedging position right.

“But if they did not hedge, rising jet fuel could potentially crush their operating margins, and dent their financial positions,” he added.

Crude oil prices, which determine the direction of jet fuel prices, are expected to average at US$79 a barrel by the fourth quarter of this year. As of last week, the International Air Transport Association’s (IATA) forecast of the average jet fuel price for 2010 stands at US$88.30 per barrel.

Industry experts claimed that crude oil prices could rise to an average of US$85 a barrel next year and US$100 a barrel by 2012.

Nevertheless, the trend of these oil prices remained largely unpredictable due to the weakening momentum of the global economic recovery.

As it is, some argued that there were more downward potential to crude oil prices (than there were upside potential) as they saw demand for the commodity softening in line with the trend of a slower economic growth in the next one to two years.

Still, not many airlines can afford to take the risk. This is because jet fuel represents one of the single-largest cost components for most airlines, accounting for up to one-third of their operating costs per passenger.

So, managing the cost element becomes even more significant as failure to do so can be detrimental to the business of the carrier.

A case in point: According to IATA, 25 airlines went bankrupt in the first half of 2008 due mainly to their inability to cope with rising fuel costs.

To recap, crude oil prices then were rising progressively from US$75 per barrel in the middle of 2007 to an all-time high of US$147 in July 2008.

Consequently, jet fuel prices within a span of 12 months also surged more than double to surpass US$170 per barrel in the middle of 2008. (Crude oil prices have since fallen to hover around the US$70 to US$80 per barrel level now, while jet fuel prices are currently hovering around the US$85 to US$95 per barrel level.)

So, to help stabilise their cost structures, airlines would typically hedge a portion of their fuel requirements at a pre-determined price for a specified period, while leaving the remainder to be purchased at spot prices.

Domestically, we see national carrier Malaysian Airline System Bhd (MAS) hedging 60% of its fuel requirement at US$100 per barrel for the rest of 2010, and 40% at US$100 per barrel for 2011, while local low-cost carrier AirAsia Bhd has hedged 26% of its fuel requirement at US$85 per barrel for 2010.

AirAsia has not entered into any hedging yet for 2011.

“Given the downside risks of crude oil prices, no one can be for sure whether it is a right or wrong strategy to hedge.

“As long as the airline hedges its fuel requirements, there will always be the realisation of marked-to-market gains or losses for every quarter of their financial results,” an analyst explained.

It’s a bet, analysts note. If airlines hedged their fuel requirements at a price lower than the market prices, then they would have protected their margins from being crushed by rising fuel prices.

But if market prices of fuel did not rise above the level at which airlines have hedged, then their under-hedged position would cost them extra money, which could probably lead to some booking losses.

For instance, MAS booked a marked-to-market loss of RM217mil from its hedging position for the three months to June 2010, widening its net loss to RM537mil for the period in review.

The average price of jet fuel for the quarter to June was around US$90 per barrel.

Chances of the jet fuel price exceeding US$100 per barrel for the rest of this year are slim, hence it is likely that MAS’ financials would continue to be burdened by its hedging position.

Nevertheless, investors have to take note that marked-to-market gains or losses resulting from hedging positions do not in any way reflect the airlines’ operational efficiency.

“It’s just a tool to mitigate fuel price volatility, and probably help to a certain extent... but ultimately, airlines would have to focus on the structural part such as fleet modernisation and optimal utilisation of resources to improve their operational efficiency and effectiveness, and that’s what gives them the competitive edge over their industry peers,” an analyst explained.

“And as long as the airlines can grow their revenue per available seat kilometre, they will be in a better position to cushion the effects of fuel price hike and enjoy better margins,” he added.

By Cecilia Kok

The Star

AirAsia to be ABL title sponsors

03 September 2010

KUALA LUMPUR: AirAsia are the new title sponsors for the Asean Basketball League (ABL), which begins on Oct 2.

It is not the first time that they are part of the ABL. They were the official carrier for the inaugural 2009-10 season.

AirAsia group chief operating officer Datuk Seri Tony Fernandes said that the new partnership would strengthen the ABL, which was gaining in popularity.

“We are very excited for the new season to arrive and proud to be back in the ABL with a bigger role by being the title sponsors,” he said. “As an Asean airline, it is our obligation to help develop the standard and quality of sports in the region.”

Exciting venture: AirAsia group chief operating officer Datuk Seri Tony Fernandes (sixth from left) giving the thumbs up after a sponsorship signing ceremony yesterday.

The second edition of the ABL features six teams – defending champions Philippine Pa­­triots, Satria Muda Britama (Indonesia), Brunei Barracudas, KL Dragons, Singapore Slingers and Cobras (Thailand).

The format of competition remains the same with a triple home-and-away for the league stages and a best-of-three series for the playoffs scheduled for February, including the final.

The Star