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 Even before an Indonesia AirAsia flight went missing on Sunday night
with 162 on board, presumed to have crashed off the Indonesian
coast, affiliates in Thailand and the Philippines as well as its
long-haul unit were posting losses while its Indonesian unit eked
out only a tiny profit in the latest quarter.
Several analysts believe the incident could deter some passengers
from using the airline, at least in the short term, with an outsized
impact on its bottom line.
"Given the thin margin nature of the airline business, our
calculations suggest that a 1 percent decline in IAA (Indonesia
AirAsia), Malaysia AirAsia and Thai AirAsia's 2015 passenger traffic
will result in a 13 percent reduction to AirAsia's 2015 net profit,"
CIMB analysts Raymond Yap and Jian Bo Gan said in a report.
The group is locked in fierce competition with regional rivals such
as Malaysian Airline System Bhd, Qantas unit Jetstar, Indonesia's
Lion Air and subsidiaries of Singapore Airlines.
With the AirAsia livery displayed prominently on the missing
aircraft, the CIMB analysts expected the AirAsia group's Malaysian
and Thai carriers would also be affected by the incident.
"But unless there is a second incident in the very near future, the
AirAsia group's strong safety track record and very attractive
commercial offerings may help limit the contagion and ensure a
speedier demand recovery," they added.
Both the Indonesian and Malaysian aviation sectors have come under
scrutiny after a series of accidents which have spooked air
travelers and spurred action by safety authorities.
Indonesia said it would review the Indonesian operations of AirAsia
to improve safety. Indonesia AirAsia is 49 percent owned by AirAsia,
with local investors holding the rest.
SHARES FALL
Investors concerned about the incident's impact sold shares of the
company and its affiliates on Monday, with AirAsia ending down 8.5
percent at its lowest close in a month on volume of 103 million
shares, 10 times the average volume. During the session the shares
had fallen as much as 12.9 percent.
Still, they are up 22 percent for the year so far, compared with a 5
percent fall in the Kuala Lumpur benchmark index.
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Shares in Asia Aviation PCL, the holding company for Thai AirAsia in
which the AirAsia group owns 45 percent, fell 2.3 percent on Monday.
Analysts believe the incident could prevent the airline from keeping
up its yields, or average revenue per passenger for every kilometer
flown.
"I was expecting yields to at least maintain on a year-on-year basis
in 2015, but now I'm expecting them to decline by up to five
percent," said Daniel Wong, analyst at Kuala Lumpur-based Hong Leong
Investment Bank. He downgraded his rating on AirAsia to a "trading
sell" from a "buy".
The direct impact on AirAsia from the Indonesia unit will be
limited, analysts said, because even before the accident the unit
was not contributing to AirAsia's bottom line and had not been
expected do so for at least several quarters, as it makes up for
unrecognized losses.
AirAsia Bhd's third-quarter profit tumbled 85 percent in
July-September on rising costs, while affiliated long-haul carrier
AirAsia X reported a fourth consecutive quarterly loss.
AirAsia also has a venture in India that launched flights in June
and aims to expand. In July, it announced plans for a low-cost
airline with Japan's biggest online retailer, Rakuten Inc, and other
companies, marking its second attempt to tap the Japan market.
(Additional reporting by Praveen Menon in KUALA LUMPUR; Editing by
Edmund Klamann)
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