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Tag: airasia

  • AirAsia on track with turnaround plans

    AirAsia on track with turnaround plans

    AirAsia group is on track with its turnaround plans and fund raising exercise for both Indonesia and Philippines units, according to Public Invest Research.

    It said on Friday yield is expected to improve towards the end of the year and the low-cost carrier is positive on 2H performance due to seasonally stronger quarters and capacity reduction by Malaysia Airlines.

    “We reiterate our Outperform recommendation and price-to-earnings based target price of RM1.88, pegged to 10 times FY16F EPS (20%-discount).

    “Our target price implies 98.1% potential upside from current level,” it said.

    At current share price, AirAsia is trading at 2016F price-to-book value of 0.46 times and at a compelling PE ratio of 4.0 times, which is at its lowest four-year historical PER.

    “We believe in AirAsia’s future performance based on positive fare trend, strong growth in ancillary income, lower fuel prices and strong brand name within Southeast Asian market,” said the research house.

    To recap, Public Invest Research met the investor relations team of AirAsia for updates on its operation and outlook in 2HFY15.

    Indonesia AirAsia (IAA) is considering the option of issuing non-voting reedemable and convertible preference shares (RCPS) to deal with its negative equity position with the conversion of part of its receivables.

    “Nevertheless, the discussions with the existing shareholders is still ongoing, and expected to complete by end of this month.

    “Meanwhile, its initial plan to issue new convertible bond of US$150mil is on track and expected to complete by end of FY15,” it said.

    Public Invest Research also  said  Philippines AirAsia’s (PAA) board on July has approved for a new equity injection of 5bil pesos (US$110mil) and also agreed on the plans on issuing new convertible bonds, which the term sheets is currently being drafted.

    Indonesia will be removing at least four to five aircraft from Jakarta, Bandung, Denpasar and Medan starting August to improve its aircraft utilisation.

    To deal with Indonesia’s floor price ruling, IAA targeted to shift c.65% of its capacity to international routes, which have a higher margin than domestic routes.

    It will also terminate its unprofitable routes such as Jakarta-Medan and Denpasar Bali-Solo, to minimise its losses.

    Philippines will be selling two of its older aircraft in Zest and in discussion for an early return of at least two older lease aircraft to third party lessors by the end-2015.

    To further improve its profitability, PAA is expected to reduce its capacity primarily from Cebu hub and redeploy it to China routes, which have a higher yield market.

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  • Thai AirAsia sets up Utapao base

    Thai AirAsia sets up Utapao base

    Thai AirAsia (FD, Bangkok Don Mueang) has set about establishing a base in Utapao with the launch of flights to Hangzhou, China on September 1. The 3x weekly charter service runs until October 24.

    Airline Route indicates the AirAsia (AK, Kuala Lumpur Int’l) subsidiary will also launch a 4x weekly service to Nanning on September 25 followed by a 3x weekly Nanchang service on September 26.

    Flights are on-board an A320-200.

    Currently, Thai AirAsia serves forty-four destinations spread across eleven countries including China, India, Macau, Myanmar, Vietnam, Hong Kong, Malaysia, Cambodia, Singapore, and Indonesia. It has four bases in Thailand, Bangkok’s Don Mueang airport, Chiang Mai, Krabi and Phuket.

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  • AirAsia launches 8th route to India

    AirAsia launches 8th route to India

    AirAsia has expanded its route network from its main base at Kuala Lumpur (KUL) with the addition of a new service to Goa (GOI) in India. The thrice-weekly service (Tuesdays, Thursdays and Saturdays) on the 3,360-kilometre route launched on 27 August and will be flown by the carrier’s A320s. The route is not served by any other carrier.

    Goa becomes AirAsia’s eighth route to India as it already serves Bengaluru, Chennai, Hyderabad, Kochi, Kolkata, Tiruchirappalli and Visakhapatnam. In total AirAsia now serves 68 destinations non-stop from the Malaysian capital.

    For Goa Airport this is the sixth international destination served after Doha (with Qatar Airways), Dubai (Air India), Kuwait City (Air India), Muscat (Oman Air) and Sharjah (Air Arabia).

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  • AirAsia bags gold at Putra Brand Awards 2015 for 6th consecutive year

    AirAsia bags gold at Putra Brand Awards 2015 for 6th consecutive year

    AirAsia Bhd emerged the gold recipient for the “Transportation, Travel & Tourism” category for the sixth consecutive year at the Putra Brand Awards 2015.

    The award was given to AirAsia for the airline’s continued presence as the country and the region’s leading and largest low-cost carrier.

    Elated at having bagged the award, chief executive officer Aireen Omar said AirAsia was committed to further grow its route network as the airline moves from being just a low-cost carrier to a value-carrier.

    The Putra Brand Awards was launched in 2010 by the Association of Accredited Advertising Agents Malaysia to recognise brand building as an integral business investment.

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  • AirAsia India Announces Flurry of Offers, Reintroduces Fares at Rs 990

    AirAsia India Announces Flurry of Offers, Reintroduces Fares at Rs 990

    AirAsia India on Monday introduced a flurry of offers both for domestic as well as international routes, to mark the group’s milestone of flying 300 million travellers.

    AirAsia had announced last week that it would come up with something ‘big’ to mark the occasion.

    On domestic routes, AirAsia has reintroduced its Rs 990- fare (all-inclusive) offer. This offer is valid for travel period of 15 February-31 August 2016 and to avail it tickets should be booked between August 10 and August 16.

    Under the AirAsia scheme, while tickets from Bengaluru to Kochi are priced at Rs 990, Bengaluru to Goa tickets would cost Rs 1190, and New Delhi to Guwahati tickets are available at Rs 2990.

    On overseas routes, AirAsia has put on block 3 million seats and is offering all-inclusive fare as low as Rs 3,999 for traveling to Kuala Lumpur from cities like Kochi, Visakhapatnam and Hyderabad.

    AirAsia has also introduced discounts for travel on overseas routes like Bangkok, Melborune, Sydney, Perth etc.

    Jet Airways also introduced a discount offer on Monday. Jet Airways announced a promotional scheme offering a flat 30 per cent discount on base fares of domestic flights and travel from India to international destinations.

    Fare wars between airlines have turned intense in Indian skies and carriers have been coming up with offers every other week to woo flyers.

    The promotional schemes offered by different airlines have helped spur strong passenger growth. The number of passengers carried by domestic airlines during January-June this year rose to 388 lakh, as against 324 lakh during the corresponding period of previous year – an increase of nearly 20 per cent.

  • Reprieve for AirAsia

    Reprieve for AirAsia

    No further risk to IAA’s licence but bigger re-rating depends on ability to become sustainably profitable

    IT has been a topsy-turvy time for AirAsia Group Bhd’s share price.

    After investor sentiment was rocked by a damaging report by GMT Research report on June 10 that questioned the financials of the low-cost airline, AirAsia’s share price came under pressure when Indonesia threatened to pull back its licence in its 49% owned unit, Indonesia AirAsia (IAA), if its finances and that of 12 other airlines are not improved by July 31.

    Indonesia’s Transport Ministry wants the 13 airlines to shore up their shareholders’ equity to 500 billion rupiah if they operated 70 seater planes by July 31 or face being stripped of their licence.

    That punitive measures were later softened with the ministry changing its mind.

    On Thursday, the ministry issued a statement saying it would “assist and support” the 13 airlines with negative shareholders’ equity to improve their equity positions if they were unable to meet the July 31 deadline.

    “The wording suggests that the ministry has performed a gentle face-saving U-turn and the airlines’ licences will not be at risk after all. With no further risk to IAA’s licence, the recent share price sell-off may partially reverse, although a bigger re-rating depends on IAA’s ability to become sustainably profitable,’’ says CIMB Research senior analyst Raymond Yap.

    AirAsia share price has thus far rebounded and closed on Friday at RM1.34, marginally up from Wednesday’s close of RM1.30, which was the recent low.

    From the beginning of this year, it has lost RM4.11bil in market capitalisation and both the GMT report and the Indonesian directive were much of the culprits for the drop.

    Maybank Investment Bank senior analyst Mohshin Aziz described the ruling as “unexpected surprise.’’

    “About half of the airlines globally have negative equity and anyone in the airline industry knows that safety is not about negative equity. It is about discipline, cashflow and enforcement,’’ he adds.

    An airline executive felt that the ruling was not enforceable, adding that “do you honestly think Indonesia will close an airline which hires 2,000 people and brings in most tourists?’’

    According to World Bank data, international tourism receipts totalled US$10bil for Indonesia for the 2010-2014 period.

    But Shukor Yusof, the founder of Endau Analytics, felt that the Indonesian Transport Minister is making a concerted effort to overhaul and clean up the domestic aviation.

    “A good number of Indonesian carriers can barely stay solvent, with the exception of the major ones like Lion Air group and Garuda. But it is unlikely they will shut them (the 13 players) down though.’’

    Apart from IAA and Rusdi Kirana’s Batik Air (a unit of Lion Air Group), the others affected by the new ruling are Cardig Air, Trans Wisata Prima Aviation, Istindo Services, Survei Udara Penas, Air Pasifik Utama, John Lin Air Transport, Asialink Cargo Airline, Ersa Eastern Aviation, Tri MG Intra, Nusantara Buana and Manunggal Air.

    Indonesia is the world’s fourth most populous nation with demand for air travel growing every quarter. From 2010 to 2014, about 95 million passengers took to the skies. There are 65 domestic airlines in the country.

    AirAsia has a 49% stake in IAA and its share of the Indonesian market is below 10%, though IAA has the largest market share in international air travel segment in Indonesia. The market is controlled by Garuda and Rusdi Kirana’s Lion Air group.

    Despite the threat of suspension, AirAsia boss Tan Sri Tony Fernandes says the airline is not pulling out of Indonesia.

    This can be explained as the market potential is huge and an initial public offering (IPO) is being planned for IAA, which operates with 29 planes in Indonesia.

    According the International Air Transport Association (IATA), by 2034, Indonesia is expected to be the sixth largest market for air travel. By then, some 270 million passengers are expected to fly to, from and within the country. That’s three times the size of today’s market.

    Short-term reprieve

    Though IAA got a reprieve, affected airlines in Indonesia will still have to improve their balance sheet if they want new routes. New routes are important for low-cost carriers as growth in traffic comes with more destinations.

    All the 13 players also need to submit their business plan by month end.

    Fernandes was reported to have said that “We were going to comply anyway. We have already set that process in motion.”

    As at end March this year, IAA had a negative equity position of 3 trillion rupiah (RM860mil) and paid-up capital of 180 billion rupiah. Hong Leong Research estimates that IAA needs at least RM1bil injection and this includes the additional paid-up capital of 320 billion rupiah or RM90mil.

    Yap of CIMB points out that the fundamental issue of IAA’s long-term future will still weigh heavily on investors minds.

    “At the moment, IAA is still some distance away from securing the subscribers for its proposed US$100mil-US$150mil convertible bonds.”

    Even if those are secured, most likely with a guarantee issued by AirAsia, it would only buy AirAsia two years of time. IAA will need to be reasonably and sustainably profitable before AirAsia’s share price can recover convincingly.

    But Fernandes told that “we have resolved and have no worries about our licences and we are confident of a profitable airline in Indonesia.’’

  • Indonesia AirAsia gets letter on positive equity position

    Indonesia AirAsia gets letter on positive equity position

    AirAsia Bhd’s 49% affiliate PT Indonesia AirAsia (IAA) has received a letter from Indonesia’s Transport Ministry laying out terms for it to ensure a positive equity position by July 31.

    In a filing with Bursa Malaysia yesterday, the low-cost carrier said it was going through the letter and intended to meet with the ministry.

    It said the letter had no immediate effect on the Indonesian operations and that the airline would at all times continue to operate within the ambit of Indonesian laws.

    A recent report by The Jakarta Post said 13 airlines in Indonesia had until July 31 to move their balance sheets into positive figures, in order to avoid having their operating permits suspended.

    The ministry discovered that these airlines had negative equity, which occurred when the value of an asset used to secure a loan was less than the outstanding balance on the loan.

    Indonesia’s Transportation Minister Ignasius Jonan was reported recently as saying it was important for airlines to maintain positive equity, as it affected an airline’s financial ability to maintain safety standards.

    Under the new regulations, planes with a capacity of 70 seats or more must have a paid-up capital of 500 billion rupiah (RM143.4mil).

    Credit Suisse aviation analyst Muzhafar Mukhtar said this development would raise the local capital injection into IAA by 25%, and limit the potential forms in which it may come.

    “AirAsia has been working on raising for IAA US$86mil in equity from local partners and US$100mil in convertible bonds from new investors. IAA’s negative equity is US$230mil. The convertible bonds can be replaced with convertible preference shares.

    “AirAsia could also convert amounts owed to it into equity; locals need to stump up the remaining to maintain majority local ownership. Either way, capital required from locals is higher than previously thought,” said Muzhafar in a report.

    He also warned that if IAA’s operating permit was suspended, it might mean the closure of the airline.

    However, Muzhafar opined that a closure of IAA should be very positive for AirAsia shareholders in the longer run, although there would be a period of transition – keeping sentiment negative (up to 75 sen per share of amount due from IAA could be written off; reported profits would decline as lease income from IAA disappeared).

    Maybank Kim Eng Research analyst Mohshin Aziz said it was unlikely that Indonesian regulators would force abrupt compliance with the equity regulation, and cause the loss of thousands of jobs.

    “Which government wants to do this (cut thousands of jobs)? Out of the 13 affected airlines, I believe more than half would find it very difficult to comply. The Indonesian regulators are likely to give some concessions with regards to compliance,” said Mohshin, who also opined that equity should have no bearing on airline safety.

    “Of course, an equity positive company would give a better feeling of comfort. But in reality, safety rather depends on the airline’s discipline, procedures, etc, etc.”

    Another bank-backed aviation analyst said he believed IAA had a good chance of fulfilling the Indonesian regulation on positive equity.

    “It is just a question of pumping in money, and IAA management has been optimistic.”

    However, the analyst was less certain about IAA’s plans on its financial turnaround.

    “The Indonesian market is unique – there is relatively much less access for consumers via the Internet, and it is not easy to manage seats,” said the analyst.

    AirAsia closed unchanged at RM1.49 yesterday, with a market capitalisation RM4.15bil.

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  • AirAsia plans IPO for Indonesia and Philippines units

    AirAsia plans IPO for Indonesia and Philippines units

    AirAsia Bhd announced on Wednesday a corporate exercise which includes potential new equity for Indonesia AirAsia (IAA) and Philippines AirAsia (PAA) via a convertible bond issuance.

    AirAsia pointed out the company has a solid footing, strong balance sheet, rich in assets and good business outlook, as it unveiled new equity plans for IAA and PAA as it sought to reduce AirAsia’s inter-company loans.

    The first step was to raising share capital to about US$100mil each for IAA and PAA from the present level of US$13.81mil and US$13.28mil respectively.

    “The management is now in the final stages of discussions with the local partners to raise share capital to around US$100mil for IAA and PAA from the present level of US$13.81mil and US$13.28mil respectively.

    “Part of the cash raised will be used to pay down AirAsia Bhd’s interco,” it said.

    Under the second step under the pre-IPO, it said plans were to raise a minimum of US$100mil from new investor(s).

    AirAsia said it is finalising the structure of the Pre-IPO exercise which is targeted to take place in the near term.

    “Through this exercise, there will be new investor(s) that will come in for both IAA and PAA. The new investor(s) will inject at least US$100mil for each associate by subscribing to convertible bonds (CB) issued by IAA and PAA respectively.

    “The CB will have a low coupon with a two-year maturity period. The CB can be converted at a rate to be determined, tentatively discounted from the valuation of the companies in 2017. As investor(s) exercise the CB in 2017, AAB will match by capitalising our debt to ensure our shareholding remains at 49% in IAA and 40% in PAA.

    “Part of the cash raised in the CB subscription will be used to pay down AAB’s interco, while the remainder will be kept in the business for working capital.

    Under the third step, the IPO will have a valuation of about US$700mil for IAA and US$600mil for PAA

    The target to IPO both associates will be in 2017, with valuation of approximately US$700mil for IAA and US$600mil for PAA.

    “The company targets to float 20% of the shares raising minimum of US$150mil. At IPO all shareholders will be diluted proportionately. Part of the IPO proceeds will be used to pay down AAB’s interco,” it said.

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  • AirAsia X cuts frequency to optimise capacity

    AirAsia X cuts frequency to optimise capacity

    AirAsia X Bhd (AAX), the long-haul, low cost airline affiliate of the AirAsia Bhd flew a total of 914,970 passengers in the first quarter, down 15% from 1.08 million passengers in the same quarter in 2014.

    According to AAX’s preliminary operating statistics released yesterday, the carrier recorded a load factor of 74% for the first quarter ended March 31, down 12 percentage points from a year ago.

    AAX said it had implemented frequency cut on certain routes, mainly China and Australia, and concurrently terminated loss-making routes – Adelaide and Nagoya – to optimise capacity in line with its turnaround strategy.

    It said the excess capacity from capacity management had been re-deployed to short-term wet lease and charter operations, to maximise revenue.

    AAX said its passenger traffic, as measured by revenue-passenger-KM (RPK), declined 17% year-on-year to 4,431 million in the first quarter from 5.34 billion in the same quarter last year, while available-seat-KM (ASK) capacity decreased by 3% to 6.02 billion.

    This was due to capacity management and slowdown in marketing activities during the first three months of this year with respect to the QZ 8501 incident in December 2014.

    “Consequently, year-on-year load factor during the quarter dropped 12 percentage points to 74% against 86% in the same period last year.

    “Current bookings trends are in line with expectations for a recovery in the second half of 2015,” the carrier said.

    In terms of fleet movement, AirAsia took deliveries of two A330-300s on operating lease during the quarter, bringing its total number of A330-300s to 25, compared with 19 a year earlier.

    On the associate companies, Thai AirAsia X registered strong loads of 82% for its first quarter, with 155,961 passengers carried, implying continued positive pick-up for the popular routes between Thailand, Japan, and South Korea.

    Thai AirAsia X currently operates 3 A330-300s while Indonesia AirAsia X has two A330-300s serving Bali-Taipei and Bali-Melbourne respectively.

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