AirAsia’s adversities won’t hurt demand for seats, says Maybank IB

Seat capacity and the number of passengers carried increase 19% YoY and 16% YoY respectively


The disreputable affair pertaining to AirAsia Group Bhd’s move in promoting Barisan Nasional (BN) prior to the 14th General Election, along with a series of conflicts with the local aviation agency, as well as India’s federal investigators, would not affect the budget airline’s passengers demand, said an analyst.

Maybank Investment Bank Bhd (Maybank IB) aviation analyst Mohshin Aziz said AirAsia is expected to maintain its load factor as the demand will most likely be affected by the discounted ticket prices, as well as issues relating to safety and quality of service.

“People who buy the tickets normally don’t follow the news about heads of the company or the conflicts that they are involved in.

“The passengers are more concerned about the ticket prices and news regarding safety and quality of services,” he told The Malaysian Reserve.

The budget carrier’s founder and substantial shareholder Tan Sri Dr Tony Fernandes was strongly criticised for ferrying former Prime Minister Datuk Seri Mohd Najib Razak on a two-day visit to Sabah in a BN-themed flight.

The aircraft was painted the coalition’s official colour blue, bearing its election campaign slogan, “Hebatkan Negaraku”.

Fernandes also appeared in a video in which he credited the government for the success of AirAsia.

The budget airline was also caught in a tangle with the Malaysian Aviation Commission (Mavcom) after the aviation tycoon claimed he was ordered to cancel 120 extra flights during the election.

Mavcom refuted Fernandes’ allegation and responded that only AirAsia proceeded to reduce its application for extra flights, while FlyFirefly Sdn Bhd, Malaysia Airlines Bhd and Malindo Airways Sdn Bhd maintained their requests.

The budget airline once again said in the headlines over the allegation that it had modified rules to get an international flying licence for its Indian unit.

Federal investigators in India have filed criminal charges against AirAsia India, a joint venture between AirAsia and Indian conglomerate Tata Sons Ltd, for the alleged “conspiracy” involving bribes to policymakers to change regulations.

AirAsia has, however, denied the claims that its founder has been summoned to appear before India’s Central Bureau of Investigation (CBI).

In its first quarter ended March 31, 2018, AirAsia recorded 87% of load factor — 2% down from same period last year.

Its seat capacity rose 19% year-on-year (YoY), while the number of passengers carried also increased 16% YoY to 10.65 million.

“The backlash from the recent allegation from India’s CBI is expected to give insignificant impact on AirAsia’s operations.

“So far, there is no evidence of any negative impact that will harm the company’s status quo,” he said.

Market-wise, Mohshin said the series of demeaning affairs have been weighing down the carrier’s share price.

“Consider the company’s reputational stock price, it has been declining and is expected to bear more negative impact.

“But we value the company at a target price of RM3.70 and we maintain the expectation for the next six to 12 months,” he said.

AirAsia shares fluctuated below RM3.10 and closed 2.26% lower at RM3.03 yesterday, while the broader Bursa Malaysia’s key index was down 0.9%.