Analysts positive on AirAsia’s growth strategies
KUCHING: AirAsia Bhd’s (AirAsia) plans to consolidate its airline associates into AirAsia Group Bhd (AAG), revamp its group structure, and capacity expansions, have met positive views from analysts.
They expect AirAsia to continue registering positive numbers and high load factors post restructural and fleet expansion.
Of note, starting Monday, AirAsia announced that it has suspended the trading of its shares on Bursa Malaysia to facilitate the share exchange with AAG.
The suspension of trading of AirAsia shares will continue until the admission of AAG to the official list and AAG shares to be issued under the share exchange are listed and quoted on the main market of Bursa Securities.
Upon the listing on the main market, AAG’s shares will assume AirAsia’s stock name and stock code.
In a report, Kenanga Investment Bank Bhd’s research house (Kenanga Research) noted that in the near term, AirAsia plans to further consolidate its remaining associates namely Thai, India, and Japan AirAsia into its books, which currently has a consolidated review of Malaysia, Indonesia, and Philippines’ operations.
It has concluded the listing of their Indonesian associate on IDX and aims to have their Philippines associate listed by the second half of 2018 (2H18).
“We are generally positive on the listing of its associates as this allows for their respective associates to tap into their local capital markets to expedite growth,” the research team said.
Meanwhile, on AirAsia’s plans to expand its fleet size, Kenanga Research noted that for FY17, AirAsia has expanded their aircraft fleet by 24 planes and plans for further fleet growth by another 30 planes in FY18 (an additional eight for Malaysia, seven for Thailand, two for Indonesia, four for Philippines, seven for India and seven for Japan) bringing total aircraft capacity by end-2018 to 225 planes.
“We are positive on the planned capacity increase as we believe AirAsia will be able to maintain healthy load factors of more than 85 per cent while sustaining airfare prices stemming from strong travel demand, coupled with their extensive route options with optimal frequencies, higher digital conversion rates from simpler website navigation, mobile application, targeted marketing, and dynamic pricing strategy.
“Despite the increased average seats per kilometres (ASK) of 11 per cent in FY17, average fares were only marginally impacted, by one per cent.
“We believe this is due to AirAsia increasing their market share within trunk routes as other domestic airlines (Malindo and MAS) rationalise frequencies to avoid price wars,” it opined.
Following the increased market share, it pointed out that AirAsia is targeting a higher aircraft utilisation rate of 14 hours (previously circa 13 hours) by focusing on shorter domestic routes in FY18, allowing for shorter turnaround time.
“All in, we expect ASK growth of circa six per cent translating to revenue growth circa 11 per cent of based on our estimates.
“In line with the capacity growth, we also expect ancillary income to grow further from more targeted marketing/sales in which AirAsia has targeted for RM55 per pax by FY18 (FY17 at RM49 per pax),” it added.
AirAsia has also indicated that it plans to deliver special dividends at least once every two years.
Kenanga Research is positive on this as it is optimistic on AirAsia’s plans to unlocking more assets by expanding its ancillary business which currently includes its inflight food and beverage business; ‘Santan’, its onboard Wifi ROKKI, its Red Cargo, and Expedia.
Based on news report, AirAsia also plans to boost its digital presence via e-commerce, and more.