KEEPING THE MOMENTUM
Airline has plans to introduce new routes and increase capacity across its operating hubs
AIRASIA Bhd is set to continue its robust growth in the second half of this year as the carrier plans more domestic routes and to take delivery of new aircraft. Analysts say demand and load factor for the airline remain strong.
LOW-COST carrier AirAsia Bhd is set for robust growth as it kicks into high gear in the second half of the year with plans for new routes and to increase capacity across its operating hubs.
Slated to take delivery of 22 new aircraft this year, analyst are positive of its plans to ramp up its growth trajectory significantly.
According to the Centre for Aviation, AirAsia is also aiming to take over a few domestic routes within Sabah and Sarawak, currently operated by Malaysia Airlines Bhd’s turboprop subsidiary MASwings, by the end of this year.
The market research company noted that the routes are part of the government’s subsidised rural air services programme, but were potentially big enough to support larger aircraft on a commercial basis.
With these and other new developments in the pipeline, AirAsia anticipated higher yield trends from its operations in Malaysia, Indonesia and the Philippines to continue into the second half, said CIMB Equities Research, adding that demand and load factors are also expected to remain strong.
The research firm said as Malaysia Airlines and Malindo Air were likely to embark on capacity reductions across the domestic network, this would abode well for AirAsia.
An AllianceDBS Research analyst said the new aircraft deliveries would be a 12 per cent addition to AirAsia’s current active aircraft count of 178. This is significant, given than the group has had over two years of minimal fleet growth from 171 back in the first quarter of 2015.
“We think this would bode well for the group’s growth and market share, though it also brings risks of yield deterioration if demand fails to keep pace.
“That said, the bulk of new capacity deployment will likely enter the fourth quarter, which is a peak period for most key markets, leaving the research house’s forecast earnings more sheltered, as supply can be timed to be well-absorbed by demand,” it said.
While noting this year was looking way better than initially thought of, an analyst at Maybank Investment Bank (Maybank IB) said operating performance-wise, AirAsia’s first half was the most impressive among global airlines.
“It was enjoying strong revenue growth with a stable costenvironment, thus swelling profits and cash flows,” it said.
In addition, AirAsia’s management was very upbeat on the near-term prospects, noted Maybank IB, adding that the competitive landscape had improved drastically as many airlines had cut back on their schedules and rationalised their schedules.
This has reduced the number of overlap flights, which greatly helped enhance the efficiency of the industry.
“(The group’s) management states that its forward load factor in the third quarter is nearing the 88 per cent level. This is an amazing feat given that the group is increasing capacity near to the double-digit levels.
“It is not too concerned with yields and the impact of competition because at these high load factor levels, the operational leverage will ensure strong profits,” said Maybank IB.
Moving forward, AirAsia Group is targeting to expand to 500 aircraft by 2027, which entails adding 30 new aircraft every year for the next ten years, said group chief executive officer Tony Fernandes recently.
“In the second half of this year, we plan to add 23 more planes to the group fleet, which will help solidify our strong position in the intra-Asean routes and the domestic markets of Malaysia, Thailand and the Philippines, where we have been steadily adding market share.
“This year is the most number of aircraft we have added in four years, demonstrating our confidence in the competitive environment in Asia,” he was quoted as saying.