This article first appeared in The Edge Financial Daily on May 2, 2019
AirAsia Group Bhd
(April 30, RM2.73)
Maintain buy with an unchanged target price of RM3.11: AirAsia Group held its Global Investor Day on Monday. The session highlighted AirAsia’s growth plans for its airline and digital business comprising revenue enhancement and cost-reduction initiatives.
On the cost-reduction front, AirAsia’s older fleet will be replaced with new A320neo and A321neo sometime in the third quarter of financial year 2019 (3QFY19). These planes have advanced fuel-efficient technology with an estimated fuel savings of 15% by FY20, translating into lower cost per seat. In addition, AirAsia are leveraging on data analytics to apply predictive maintenance, ensuring efficient scheduling of parts which could lead to a potential savings of US$40,000 (RM165,600) per aircraft per year.
AirAsia’s online platform AirAsia.com recorded a gross merchandise value (GMV) of RM16 billion only from the sale of flight tickets. This will be further strengthened by its dynamic fare adjustment mechanism which can predict the purchasing power of a visitor according to the search trend. Plans to increase its GMV to US$25 million by 2025 will not include opening up AirAsia.com for other travel-related businesses such as hotels and tour packages but also e-commerce, online media (subscription to music and online gaming) and ride-hailing.
To complement AirAsia.com, AirAsia has also introduced BigPay to enable mobile payments, cash withdrawals, pre-paid debit MasterCard and point-of-sales transactions for major currencies at a very competitive exchange rate. This facility is comes along with the loyalty programme BIGLIFE which enables the purchase of ancillary items and even hotels on AirAsia.com using points. Looking ahead, BIGPay will venture into providing loans for businesses and remittance services, targeting foreigners working across the Asean region.
Teleport (formerly known as RedCargo Logistics) manages belly cargo space for all of AirAsia airlines. Recently, Teleport has also formed an arrangement with Oman Air which will give customers access to the belly space on Oman Air’s cargo network which covers Africa, the UK and Europe. This signifies Teleport’s agility to integrate the demand and network from other airlines with more extensive coverage. In relation to e-commerce activity, Teleport will eliminate the various layers of the traditional air cargo fulfilment process from 138 hours to just 12 hours which will also be enhanced with predictive analytics. Therefore, one-day delivery could be a norm under the services offered by Teleport. — MIDF Research, April 30