‘China venture to provide larger revenue for AirAsia’
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.