AirAsia X rises 4% on cheaper fuel cost savings

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KUALA LUMPUR (Nov 4): AirAsia X Bhd rose among actively-traded stocks on Bursa Malaysia, potentially on remarks by sister company AirAsia Bhd’s chief executive officer (CEO) that lower fuel prices would translate to cost savings for both budget airlines.

At 3.04 pm, AirAsia X rose 2.5 sen or 3.36% to 77 sen, giving it a market capitalisation of RM1.84 billion. The stock was the ninth most-active counter with 15.9 million changing hands.

It earlier rose to an intraday high of 78.5 sen.

AirAsia, however, fell one sen or 0.4% to RM2.55. For comparison, the FBM KLCI declined 6.5 points or 0.4% to 1,846.84.

AirAsia CEO Aireen Omar told the press today after AirAsia’s in-flight WiFi services launch that the plunge in fuel prices on lower crude oil prices would definitely benefit the aviation industry.

Aireen however declined to provide any cues on the impact of cheaper jet fuel to AirAsia’s third quarter results which is due for announcement this month.

“It will result in some cost saving, not only for us, (but) for AirAsia X as well,” Aireen said.

She, however, declined to elaborate about the loss-making long-haul airline AirAsia X.

AirAsia X's net loss widened to RM128.79 million in the second quarter ended June 30, 2014 from RM32.3 million a year earlier.

Reuters reported Brent crude oil fell 37 cents at US$84.41 a barrel on Tuesday, extending losses to a fourth session after top oil exporter Saudi Arabia cut prices to the United States.

CIMB Investment Bank Bhd said jet fuel prices had fallen from a nine-month 2014 average of US$119 a barrel to US$100 a barrel currently.

“Even accounting for extant fuel hedging during 4Q14, airlines will still benefit materially in 2015 if the jet fuel prices stay low.

"As such, airlines may still be able to deliver respectable earnings growth next year, even without industry-wide capacity adjustments,” CIMB analysts Raymond Yap and Gan Jian Bo said.

Yap and Gan said CIMB had a "reduce" call on AirAsia X shares with a target price of 72 sen, as “tough yield conditions on Australian routes could drag on for longer.”

CIMB, however, has an "add" call on AirAsia shares.

“But our target price of RM3.25 (20% premium to sum of parts will probably take till end 2015 to materialise, from end-2014,” CIMB said.