Daily KL-S’pore flights soar

PETALING JAYA: From yesterday, air travellers on the Kuala Lumpur-Singapore route can choose 14 daily flights from low-cost carriers and more than 15 from full-service carriers.

This is a huge jump in choices from a year ago, which saw only Malaysia Airlines and Singapore Airlines plying the route.

In February, low-cost carriers had begun launching limited flights.

But from Dec 1, all airlines in Malaysia and Singapore can launch flights between the two capital cities.

The change has come a month ahead of the liberalisation of the Asean Open Skies for capital cities.

Both AirAsia and Tiger Airways, which are flying seven and three to four flights respectively on the route, are eager to increase the frequencies.

AirAsia Bhd group chief executive officer Datuk Tony Fernandes told StarBiz yesterday that he wanted to add an additional flight by next month when the airline took delivery of more aircraft.

“My target is to have 12 daily flights for stage one. Eventually we would like to have 24 flights daily or every half-hourly flight,’’ he said.

The response had been “fantastic’’ for the KL-Singapore route even though it was just day one of the sector’s full liberalisation, he said.

The budget airline sees its load factor averaging 75% on the route.

Tiger Airways chief executive Tony Davis told StarBiz from Singapore that the carrier had seen huge demand for its flights and would increase its frequency to five daily flights from three or four now on weekdays.

“Our loads are very good and we see strong consumer demand. We just saw our 3.30pm flight took off from Singapore to KL and there were only two empty seats out of the 180 seats in the aircraft,’’ Davis said.

National carrier MAS commercial director Datuk Abdul Rashid Khan, believes the Singapore-KL route has always been a springboard for connecting flights from KL International Airport (KLIA) to its global destinations such as outbound traffic from Singapore and likewise, for the return via KLIA.

“We will continue to leverage on (our) partnerships to remain competitive as well as profitable on this route,’’ he said in an e-mail response.

An SIA spokesman, in an e-mail reply said the opening of the sector was good for consumers and the airlines. Competition would force airlines to be more cost effective and innovative in the product and service offerings, he added.

“We offer competitive fares. The Singapore-KL route will now function like most other markets in the region. There will be price competition and fares will vary in line with demand,’’ the spokesman said.

MAS and AirAsia mount seven daily flights each on the route, SIA and SilkAir, four flights each, Tiger, three or four flights and JetStar, three.

Malaysia’s Firefly is still hoping to ply the route from Subang and is still awaiting the Government’s response, according to managing director Eddy Leong.

AirAsia Aims To Secure 10 New Routes In India

KUALA LUMPUR, Dec 1 -- Low-cost carrier, AirAsia Bhd, is confident of securing 10 new routes to India within the next eighteen months, Group chief executive officer Datuk Seri Tony Fernandes said Monday.

He said the carrier had launched its inaugural Kuala Lumpur-Tiruchirappalli flight in south India recently.

"AirAsia received overwhelming response for the route. Barely a month after operating the route, we recorded 100 per cent load factor from Dec 1 to 18," he told reporters.

AirAsia currently serves the route using the 180-seater Airbus 320.

AirAsia Falls After Quarterly Loss, Analyst Downgrade

Dec. 1 -- AirAsia Bhd. fell the most in almost five weeks in Kuala Lumpur trading after Southeast Asia’s biggest discount carrier reported a loss.

The carrier slid as much as 11 sen, or 9.9 percent, to 1.00 ringgit, the worst performer on the benchmark Composite Index. The loss was the first since the company went public in 2004.

AirAsia lost money on trades held by the bankrupt Lehman Brothers Holdings Inc. and wrongway bets on oil prices. Chief Executive Officer Tony Fernandes also faces slowing travel demand at the airline’s Thailand hub, which has been paralyzed by a week-long anti-government protest.

“It’s a sell,” Christopher Eng, an analyst at OSK Research Sdn., said in a report today. “We are concerned about its longer-term prospects as its associates continue to bleed and AirAsia reaches saturation point.” He downgraded the stock to “sell” from “neutral” and lowered his price target to 67 sen from 1.10 ringgit.

Even after stripping out the one-time charges, AirAsia still recorded operating losses “significantly below” OSK’s estimates and consensus expectation, Eng said.

AirAsia posted a loss of 465.5 million ringgit ($129 million) in the third quarter as it had a charge of 215 million ringgit to cover costs from unwinding hedging contracts and the likely non-recovery of collateral for trades held by Lehman.

Thai Losses

Thai AirAsia Co., the airline’s Thai unit, had a loss of 250 million baht ($7 million) as travelers shunned the country. AirAsia last week canceled all flights to the Thai capital after anti-government protesters stormed the main terminal of the city’s airport, closing it down.

Thai Airways International Pcl and Thai AirAsia were the biggest operators at Bangkok’s Suvarnabhumi last year, accounting for 28 percent and 12 percent of commercial aircraft movements respectively, Airports of Thailand said on its Web site.

Global air travel declined for a second consecutive month in October, with the International Air Transport Association predicting worse to come because of recessions in many parts of the world. The trade group represents more than 200 airlines.

BRIEF-HSBC cuts Air Asia target price to RM 0.60

Nov 30 (Reuters) - Air Asia :

* HSBC (nyse: HBC - news - people ) cuts air Asia target price to rm 0.60 from rm 0.90

* Management said at the briefing it will recover the cost of unwinding its fuel derivatives in 2-3 months via a simple derivative structure pending on oil prices falling further. Management would not provide more details on this plan nor elaborate on its previous announcement regarding potential privatisation at MYR1.30-1.35 per share.

* We maintain our long-held view that Air Asia create rather than eliminate risk via its derivatives positions, especially where they are off balance sheet and poorly disclosed.

* Cutting earnings forecast: Stripping out forex and derivative losses, 3Q08 recurring pretax losses of MYR77m exceeded our forecasts by MYR67m mainly due to higher operating costs. We increase our FY08-10 operating costs assumptions and adjust FY08 earnings for 3Q08 forex and derivative losses and lower tax credit.

* Maintain UW with lower TP: We continue to value the company using asset replacement value, add non-aircraft assets less liabilities and obtain a revised target price of MYR0.60 based on our revised earnings. Risks include Air Asia providing limited disclosure about its derivative positions, making it difficult to assess its gains or losses.

Air Asia Fees To Air Asia- X Rises

AIRASIA Reported Nov 1, 2008 that its Services Agreement to AIRASIA-X had been extended for a further period of 12 months effective Nov 1, 2008 with new inclusions for a sum of RM43m inclusive of a 10% mark-up.

AIRASIA's FUEL SPECULATION BINGE ENDS WITH 3QFY08 LOSS OF RM465M

CLASSIFICATION: ACCOUNTING/AUDIT NOTIFICATION/ANALYSIS & BUSINESS PROJECTIONS TYPE: Short Analysis / Reviews 01 December 2008

AIRASIA's FUEL SPECULATION BINGE ENDS WITH 3QFY08 LOSS OF RM465M By J Vong AIRASIA's investor relations department has been less loud with its releases in the past 2 quarters typifying almost third-rate-run listed companies in respect of informing their investors promptly and clearly. This was, of course, not lost on the small investor who had been piqued for the last 3 quarters following some research house's alert that AIRASIA had taken bold forward selling positions in oil options at USD92.50 per barrel. Oil prices, of course, obligingly rose to USD147 per barrel to upset AIRASIA's 'hedging' plans. NEW DEFINITION OF HEDGING When AIRASIA realised that it may have gotten in at the wrong end of oil price movements, the Company announced that the oil options 'selling' was for 'hedging' purposes and that losses could be minimised through a reversal of positions. The Airline claims of its fuel hedging (which is for consumption) and losing money in a price uptrend is definitely unusual. That points to speculation rather than hedging. TONY FERNANDEZ, the CEO, must come on record of having the distinction of trying to redefine the meaning of 'hedging'. Hedging as we were taught in university meant the buying or selling forward of positions where there was certainty of consumption or output. AIRASIA is well known for its forward sales of airline seats for cash. So 'hedging' would have meant the forward buying of it required oil positions which any small investor would have thought to be 'smart' and 'safe'. Obviously, AIRASIA 'sold' forward oil positions and turned itself into an commodities speculator instead of being just an airline operator. So 3QE Sep 2008 Loss of RM465m must be something of a record of sorts (wiping off the entire YTD earnings plus more) for which the CEO must bear full responsibility. 3QE SEP 2008 FINANCIALS SEES SHARPLY HIGHER REVENUES For 3QE Sep 2008, AIRASIA recorded sharply higher Revenues of RM658m against RM461m in 3QFY07. Gross Profit from Operations was RM103m or 15.6% on Revenue against RM166m or 36% in 3QFY07. Profit from Operations dropped to RM91m or 13.8% from RM145m or 31% in 3QFY07. 3Q-FY08 reflected the huge impact of rising oil prices on AIRASIA's operations. But despite that, the Airline turned in an Operating Profit due in no small part to its extremely strong Revenue growth of 42.7% over 3QFY07. 9ME SEP 2008 FINANCIALS For the 9ME Sep 2008, the Cumulative Loss was RM294.8m or 12.4 sen per share wiping off 2008 cumulative earnings plus more. 9M-FY08 Revenue rose to RM1.80 bil. compared with 9M-FY07 Revenue of RM1.30 bil - a sharp 38.4% growth. Revenue growth was due largely to the new aircraft deliveries and an expanded route network. INTEREST CHARGES Actual interest charges for its secured Borrowings of RM6.35 bil. for 3QE Sep 2008 recorded a Net Interest Expense of RM80m after taking into account Interest Income. The effective interest rate on borrowings amounted to 5.2%. This reflected that AIRASIA was still profitable operationally despite the turbulent period of oil price surge. 3QFY08 FUEL SPECULATION LOSSES 3QFY08 speculative losses were, however, very large. AIRASIA recorded a Loss of " .... RM215m ... for the .... unwinding of our fuel derivative contracts and also the likely non-recovery of margin held by LEHMAN BROTHERS COMMODITY SERVICES inc ...(which filed for bankruptcy on Sep 15, 2008) ....". The Company also said that fuel prices are now trading at levels last seen in 2005. FUEL HEDGING AIRASIA in its 3QFY08 report now says that the Group as at Sep 30, 2008 had partial cover over 35% of its fuel consumption for Yeas 2008 and 2009. The statement which was released on Nov 28, 2008 also said that ".... the Group had subsequently liquidated its positions to take opportunity of the lower spot prices....". There goes another ambiguity in its disclosure. However, AIRASIA cautions that with the current weakening of the Ringgit against the USD it will have a negative financial impact. 3QFY08 FOREX TRANSLATION LOSS OF RM212M WITH POTENTIAL FOR REVERSAL 3QFY08 Forex Translation Losses were RM212m. The Company said that the Loss could potentially turn into " .... a gain of RM365.6m ..." based on the USD Exchange rate which can only " .... be reflected in the financial statements upon realization over the duration of these contracts ....". AIRASIA said that the Group " .... had hedged 75% of its dollar liabilities pertaining to its aircraft, engine and simulator loans into Ringgit by using long dated foreign exchange ....". The Group had also entered into " .... interest rate swaps (some of which are capped) to hedge against fluctuations in the US-LIBOR on its existing and future aircraft financing for deliveries between 2005 and 2009. The effect of this transaction enables the Group to pay fixed interest rate of 3.25% on Ringgit and between 4.55% and 5.2% on USD over a period of 12 to 14 years ....". CAPEX COMMITMENTS AIRASIA said that as at Sep 30, 2008, the Company had contractual Capex commitments for RM16.81 bil. and Authorised but uncontract Capex of RM7.29 bil. giving the Group a total of RM24.1 bil. in Capex spending. NON-RECOGNISED ASSOCIATE LOSSES AIRASIA's associates THAI AIRASIA and INDONESIA AIRASIA continue to be loss-making. FRS 128 defines interest (equity) in an associate as " ... the carrying amount of the investment ... under the equity method together with any long-term interests that, in substance, form part of the investor's net investment in the associate ...". On the above basis, the unrecognised share of Operating Loss as at Sep 30, 2008 amounted to RM75.8m in THAI AIRASIA and RM89.5m in INDONESIA AIRASIA. The associates continue to be loss-making. DEFERRED TAXES AIRASIA enjoys tax deferment for reason of its capex spending. There have been detractors from the way the Company treats its deferred tax. As at Sep 30, 2008, Deferred Tax recorded RM146.2m. CASH BALANCE Cash Balance as at end Sep 2008 was RM774m compared with RM547m as at end Sep 2007. OPERATIONS OVERVIEW AIRASIA reported that for 3QE Sep 30, 2008, the Airline experienced 'seat load factor' of 75% compared with 76% for the immediate preceding quarter. The was explained as being in line with seasonal fluctuations. PASSENGER VOLUME GROWTH STILL HIGH Passenger volume grew 24% in 3QFY08 to 3.01m passengers compared with 3QFY07. In 2QFY08, the Airline carried 2.82m passengers. Average fare was higher by 12% at RM195 compared with RM174 in 3QFY07. The higher average fare was due to ancillary income and from the increase in fees. The lower overall load factor to 75% was due to significant seat capacity addition during the period and the full impact of the Moslem fasting month. For 3QFY08, Revenue per Available Seat Kilometre (ASK) was 13.63 sen. Cost per ASK was 13.54 sen and Non-Fuel Cost per ASK was 4.43 sen. The average number of operating aircraft during 3QFY08 was 38.19 compared with 36.6 in 2QFY08. PERFORMANCE OF ASSOCIATES THAI AIRASIA operations continue to be challenging due to the political street demonstrations. THAI AIRASIA achieved a load factor of 79% and a on-time performance of 93%. THAI AIRASIA now operates 7 new Airbus 320 aircraft. INDONESIA AIRASIA achieved load factor of 78% down from 2007 load factor of 79%. The Indonesian outfit which operates Boeing 737s has received its first Airbus 320 on Sep 19, 2008.

AirAsia To Mount Second 'Rescue Flight' Saturday

KUALA LUMPUR, Nov 28 -- AirAsia will mount another "rescue flight" from Kuala Lumpur to Bangkok (U-Tapao) via Singapore Saturday.

In a statement here Friday, it said the flight will depart KL International Airport's LCC Terminal at 4.25pm and arrive at Singapore's Changi International Airport at 5.20pm.

It will leave Singapore at 5.50pm and arrive at U-Tapao Airbase in Bangkok at 6.50pm.

AirAsia said the flight departing Bangkok for Kuala Lumpur at 7.20pm would give priority to AirAsia passengers who have been stranded in Bangkok for the past few days. It will arrive at Kuala Lumpur at 10.05pm.

AirAsia said it would notify the affected passengers by phone and those who wish to board the flight urgently should contact the company's 24-hour emergency hotline at +6625159999 in Bangkok or +603-86604554 in Malaysia.

It said AirAsia passengers landing at U-Tapao Airbase will be transported by bus to central Bangkok free of charge.

Those flying back to Kuala Lumpur will be provided complimentary bus pick-up to U-Tapao. The pick-up time is 2pm from Novotel Bangna Bangkok, 333 Srinakarin Road, Bangkok.

AirAsia mounted its first rescue flight to Bangkok today carrying 20 passengers and would return to Kuala Lumpur with 63 passengers.