AirAsia declines on concerns aviation ban will hurt Thailand unit growth

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KUALA LUMPUR (Apr 3): AirAsia Bhd shed three sen or 1.29% after analysts said its operations might be affected by Japan, China and South Korea's move to ban Thailand-registered airlines from landing in the North Asian countries.

The ban was due to poor safety records, according to news reports. AirAsia (fundamental: 0.2; valuation: 0.6) operates in Thailand via Thai AirAsia.

In Malaysia, AirAsia shares fell to RM2.30 at 11.07am with 155,300 traded. AirAsia X Bhd (fundamental: 0; valuation: 3) shares were unchanged at 46 sen at 11:09am with 502,700 shares transacted.

In a note today, Hong Leong Investment Bank analyst Daniel Wong said Thai AirAsia's growth plan would be affected by the ban.

Wong said the ban came at a time when Thai AirAsia was expanding its aircraft fleet to popular North Asian destinations.

“We are relatively negative on the ban, which may impair the potential growth of Thai AirAsia in the short term.

“Thai AirAsia has planned for the delivery of additional five new A320s (existing 40 A320s fleet) this year, which will be deployed on hot routes (China — Beijing, Shanghai and Shenzhen; Japan — Tokyo and Osaka; S.Korea – Seoul and Busan), given the strong recovery of tourism industry,” he said.

Wong said the ban was not expected to be prolonged as the Thailand government was taking steps to enhance safety procedures.

Reuters reported that Thailand's Department of Civil Aviation has re-evaluated licences of Thai airlines flying to Japan and South Korea, two major destinations for Thai travellers to ensure compliance with international standards.

Nearly 120,000 travellers seeking to fly to Japan in the next two months were expected to be hit by the ban, which affects national carrier Thai Airways International and long-haul, low-cost carriers like Thai AirAsiaX and NokScoot.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)