KUALA LUMPUR (Sept 8): Shares of AirAsia X Bhd rose as much as 1 sen or 1.32% in early trades after the company announced that its Indonesian unit (IAAX) has been granted an air operator's certificate (AOC) by the Indonesia’s aviation regulator.

As of 10.29am, AirAsia X was trading at 76 sen, up 0.5 sen or 0.66% with some 988,400 units changing hands. The counter was trading between 75.5 sen and 76.5 sen today.

In a filing with Bursa Malaysia last Friday, AirAsia X said its Indonesian unit had been granted an air operator's certificate (AOC) by the country's Directorate General of Civil Aviation (DGCA).

An AOC allows an aircraft operator to use its aircraft for commercial air operations.

“With this AOC, IAAX will now commence application for operating permits and slots to its intended international routes.

“At present, IAAX has one Airbus A330-300 leased from Epic Leasing LLC — an intermediary between the company and IAAX. IAAX also aims to lease additional aircraft, moving forward,” said AirAsia X.

Despite this, Public Investment Bank Bhd (PIBB) is maintaining its "neutral" call on the stock with an unchanged target price

In a note to client on Monday, PIBB says it expects AirAsia X to face competition from other regional airline carriers and volatility in foreign exchange rate.

"In addition, Malaysian Airline System Bhd (MAS) has yet to announce its future route planning, hence there remains pressure on AAX's future earnings," the bank said.

This has prompted the bank to retain its "neutral" call on the stock with the target price of 79 sen.

Going forward, PIBB says: "Although the company has not yet announced its first route and the launch date, we expect IAAX will commence operations by the end of the year, as previously guided from management, and most likely to start with an Australian destination and subsequently with the North Asian markets."

PIBB notes the Bali's Denpasar International Airport will be the main hub for the Indonesian startup.

"IAAX will benefit as it is the first long-haul, low-cost airline carrier in the Bali hub. Bali has a huge travel and tourism market, especially to North Asia and Australia.

"Furthermore, IAAX can leverage on the short-haul network and connectivity of Indonesia AirAsia for feeder traffic," it adds.