Thursday 28 Mar 2024
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KUALA LUMPUR: AirAsia X Bhd (AAX) stands to benefit from the weakening ringgit, which fell past the psychological RM4 per US dollar level for the first time since 1998 to close at 4.0395 yesterday, as about 40% of the budget airline’s revenue are in Australian dollars, said its acting chief executive officer (CEO) Benyamin Ismail.

“The weakening ringgit would be beneficial to us as 40% of our revenue are denominated in Australian dollars, with another 25% denominated in ringgit and the rest in US dollars,” he told reporters yesterday after an event to announce the appointment of celebrity David Foster as the airline’s new global brand ambassador for its premium product range.

Benyamin also reiterated AAX’s confidence in returning to profit by the fourth quarter ending Dec 31, 2015 (4QFY15), despite posting weak operating results for the second quarter of this year.

AAX carried 20% fewer passengers (810,944) in the April to June 2015 period, down from 1.02 million a year ago. The airline’s passenger load factor also dropped 12 percentage points to 68% in 2QFY15 from 80% in 2QFY14.

“The loads were down (in 2QFY15), but the good thing was our average base fare improved by 10%,” said Benyamin.

AAX said it sees a return of business from 3QFY15 as it reinstates a positive brand image in Australia and major rival Malaysia Airlines (MAS) rationalises its aggressive pricing.

“The Australian market will still be our bread and butter (going forward). It was our best-performing (market) until MAS started dumping fares. It still has to make money. So, we see a return of business from 3QFY15,” said Benyamin.

Benyamin said AAX is unfazed by added competition from Malindo Air, which had launched flights to Kathmandu in February and will launch flights to Perth and Taipei soon. He added that AAX will be able to leverage parent AirAsia Bhd’s network.

“Our main competitor is still MAS. A rational MAS is good for us, (and) an irrational MAS is not,” he said.

Meanwhile, AirAsia group CEO Tan Sri Tony Fernandes said AirAsia is steadfast in its decision to continue operating from Terminal 2 of the Kota Kinabalu International Airport (KKIA).

Fernandes was commenting on Tuesday’s anouncement by Deputy Transport Minister Datuk Abdul Aziz Kaprawi that all airlines including AirAsia must move to Terminal 1 of KKIA.

“Moving to Terminal 1 will increase the cost for passengers. There is tremendous competition in the region. Increasing the passenger service charge (from RM32 for international passengers departing from Terminal 2 to RM65 at Terminal 1) will kill tourism,” said Fernandes.

“Moving (to Terminal 1) will also create congestion. AirAsia has made it very clear to the Ministry of Transport that we are not moving because of the negative impact,” he added.

This is not the first time that AirAsia had locked horns with the government over the relocation of its operations. AirAsia had in 1998 refused to move from the Subang airport to the low-cost carrier terminal (LCCT) in Sepang and from the LCCT to klia2 last year.

“It’s time to stop making crazy decisions in Malaysia. klia2 was clearly a decision that should not have happened. Don’t make another mistake (on KKIA). We know what we are doing,” said Fernandes.

“Malaysia Airports Holdings Bhd’s (MAHB) management had caused a three-year delay (in the completion of) klia2, (which) had resulted in the doubling of (construction) cost. Surely its credibility is lower than that of AirAsia’s,” he said.

Fernandes also expressed his unhappiness over the appointment of the Ministry of Transport’s secretary-general and deputy secretary-general to MAHB’s board. “The regulator should be independent, listen to both sides of the story and then decide what is best for the country,” said Fernandes.

At a separate event later, Transport Minister Datuk Seri Liow Tiong Lai was reported as saying that he will intervene in AirAsia’s dispute with MAHB over the airline’s refusal to move to Terminal 1.

Liow said he was disappointed as the airline and the airport operator were supposed to work together and should have resolved the issue by now.

“If they can’t solve this issue, then I may have to step in. I will look into it because the resolving of this issue has been long overdue.

“Of importance is the convenience of the travellers and also national interests,” said Liow in a The Malaysian Insider report.

AirAsia (fundamental: 0.2; valuation: 1.4) shares fell 5 sen or 3.94% to close at RM1.22 yesterday, with a market capitalisation of RM3.53 billion. AAX shares closed 1 sen or 5% lower at 19 sen, bringing a market cap of RM829.63 million.

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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. Go to www.theedgemarkets.com for more details on a company’s financial dashboard.

 

This article first appeared in digitaledge Daily, on August 13, 2015.

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