‘China ven­ture to pro­vide larger rev­enue for AirAsia’

New Straits Times - - Business -

KUALA LUMPUR: AirAsia Bhd’s ven­ture into China will make it the largest for­eign low-cost car­rier (LCC) in the coun­try and com­plete its pres­ence in the Asia Pa­cific re­gion, said AmIn­vest­ment Bank Bhd.

In a re­search note, it said the pro­posed joint-ven­ture (JV) was pos­i­tive to Asi­aAsia’s long-term out­look. The air­line was the first for­eign LCC to en­ter China in 2005, and AirAsia and AirAsiaX cur­rently fly to 15 des­ti­na­tions in the coun­try.

AirAsia also has op­er­a­tions in Thai­land, In­done­sia, the Philip­pines, In­dia and Ja­pan.

“We ex­pect the JV to re­sult in an in­crease in the num­ber of des­ti­na­tions and fre­quency of AirAsia’s op­er­a­tions in China, which should trans­late into larger rev­enue and earn­ings con­tri­bu­tions from its op­er­a­tions in the coun­try over the long term,” the re­port added.

To re­cap, AirAsia on Sun­day signed a mem­o­ran­dum of un­der­stand­ing with Ever­bright and He­nan Govern­ment Work­ing Group to es­tab­lish an LCC in China.

The par­ties will in­cor­po­rate a JV, to be known as AirAsia (China), for the pur­pose of op­er­at­ing a low-cost avi­a­tion busi­ness based in Zhengzhou, the cap­i­tal of He­nan prov­ince in cen­tral China.

AirAsia (China) will also in­vest in avi­a­tion in­fra­struc­ture, in­clud­ing a ded­i­cated LC ter­mi­nal at the Zhengzhou air­port and an avi­a­tion academy to train pi­lots, crew and en­gi­neers, as well as main­te­nance, re­pair and over­haul (MRO) fa­cil­i­ties to ser­vice air­craft.

AmIn­vest­ment Bank said Zhengzhou was cho­sen as the base for AirAsia’s en­trance into China due to its strate­gic lo­ca­tion and im­por­tance as a lo­gis­tics hub.

How­ever, the po­ten­tial JV is still in the pre­lim­i­nary stage, and would have min­i­mal im­pact on AirAsia in the short to medium term, AmIn­vest­ment Bank add- ed.

It has made no changes to its earn­ings fore­casts for 20172019, and has main­tained a “buy” call with an un­changed fair value of RM3.63 per share.

On Bursa Malaysia yes­ter­day, AirAsia shares closed 2.3 per cent higher to RM3.56, while AirAsia X shares added half a sen to 50.5 sen.

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