Analysts positive on AirAsia’s digital push towards tech-savy model

KUCHING: AirAsia Bhd’s (AirAsia) five-year transformation plan into a ‘digital’ gained positive views from analysts as the move could drive its growth further.

The research arm of Kenanga Investment Bank Bhd (Kenanga Research) said in the next five years, AirAsia shared their growth plans to transform their existing traditional market airline model into a more tech-savvy digital airline.

Ultimately, the airline plans to use digitisation to increase profitability by driving revenue up and costs down.

It further noted that AirAsia’s plan to engage Artificial Intelligence (AI) and leverage on user data they have collected over these years for multitude of applications.

“We gather that AI would be able to help pin point more profitable routes for their capacity allocations, and enhance the pricing of their fares to maximize revenue as well as ancillary income ( targeting RM60 per pax),” it added.

Meanwhile, AirAsia has also engaged with BIG data specialists to leverage on their existing user data to increase marketing efficiency to touch base with a more targeted market.

Furthermore, the research team noted that AirAsia plans to enhance passengers flying experience by having WiFi/Intranet installed in their planes so that passengers can be connected while flying by using their smartphones to purchase in-flight entertainments packages, which are movies, duty- free items and other merchandise.

Previously, inflight movies were only attainable through tablets rented from AirAsia.

“All in we are positive on AirAsia’s direction of going digital which we believe would help drive growth further.

“In terms of costings, we believe the engagement of AI and big data specialist would cost the group up to tens of millions, which are still insignificant compared to their FY18E core net profit (CNP) of RM1.5 billion,” it opined.

Aside from that, it believed that AirAsia’s capital expenditure (capex) allocation of circa RM150 million to RM300 million would be needed for the installation of WIFI antennas onto its entire feelt, which would be spread across the next five years.

“We believe these capex is manageable as we have already incorporated capex allocation of RM1.5 billion each in our FY17 to FY18E estimates,” it added.

As for AirAsia’s ongoing move to consolidate its units, Kenanga Research said AirAsia has reiterated that it is striving towards creating One AirAsia by consolidating and owning 100 per cent effective stakes in Thai (current effective interest 45 per cent), Philippines ( current effective interest 19.6 per cent), and Indonesia ( current effective interest 49 per cent).

India would be left out from the equation for now given the stricter and more complicated regulations there, it noted.

“While we believe the goal is achievable through issuance of new shares at AirAsia group level and subsequently swapping it with other existing shareholders of associates, we opine that it might not materialize in the near term given that there are still various regulation hurdles in respective countries to overcome.

“Meanwhile, management noted that AirAsia is targeting to list Philippines AOC by 2Q18,” it said.