AirAsia X attracts suitors

  • Business
  • Monday, 20 Jul 2015

PETALING JAYA: AirAsia X Bhd (AAX), which has a market capitalisation of RM767mil, has attracted the attention of at least two foreign airlines looking at taking up a stake in the medium haul low-cost airline.

Both suitors are premium carriers, one from the Middle East and the other an established airline from Europe, according to an executive familiar with the industry.

“They are keen to be part of the growth in Asia, hence the interest in AAX and given the cheap valuations,” said the executive.

But at current valuations, the main shareholders of AAX, such as group chief executive Tan Sri Tony Fernandes, were not keen on any tie-up with a premium carrier, said sources.

The pricing is also not right at the moment, they said.

“Unless it is a meaningful tie-up (and) if they want to be part of the travel action in Asia,” said the sources.

Travel trade continues to grow in Asia ahead of other markets and it will remain buoyant for sometime to come with the rising middle-income earners, despite the mushrooming of low-cost carriers in the region. The two carriers are attracted to the hub concept that AAX has, and also the fact that the airline flies to North and South Asia.

Experts say the overcapacity in the region is slowly easing off.

More than six months ago, German airline Lufthansa and its German Wings were said to be in talks with AAX shareholders. However, after the fatal incident involving German Wings, the talks fizzled out. Whether they have resumed again is not clear.

AAX is a sister company of AIRASIA, which has a unit in India, AirAsia India.

Several months ago, AirAsia India was in talks with Jet Airways and Etihad Airways for some collaboration, but nothing materialised, the executive said.

AAX share price has never lived up to expectations from the time of its IPO. It closed at 18.5 sen last Thursday.

CIMB Research recently downgraded its rating from a “hold” to “reduce” as it sees a more challenging outlook and continuous drain on AAX’s cash. It price target for AAX is a mere 17 sen.

There was also talk at some point that AirAsia itself should buy AAX but Fernandes was said to be not keen as he preferred at this stage to keep the two businesses separate although AAX’s valuation and current stock price make it an interesting option.

In the middle of last year, there were talks of some collaboration between AAX and Malaysia Airlines (MAS) - during the times of Ahmad Jauhari Yahya as CEO. That has remained on the shelf since.

AAX director Fernandes could not be reached for comment.

The airline has been in restructuring mode since early this year after reporting quarters of losses. It has cut some of its routes and frequencies in its bid to trim cost and streamline its operations. It now focuses mainly on the China and Australian routes.

The second quarter is going to be a “bad quarter”, according to the executive. He said the airline would continue to report losses, but things were expected to begin picking up by the third and fourth quarters, provided jet fuel prices remained at current levels and competition in the market place was status quo.

However, with MAS finally waking up from its deep slumber under the stewardship of Christoph Mueller, it is unclear if competition will get any lesser.

For a long time, AAX had to keep its fares very low because MAS offered competitive prices to win passengers on routes that AAX plied but what Mueller will do is still unclear.

For its first quarter ended March 31, losses widened to RM125.9mil from RM11.28mil a year earlier, though revenue increased by 3.45% to RM775.37mil.

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 7
Cxense type: free
User access status: 3

Business , airasia x , suitros , foeign , airlines , stocks , shares , klci ,


Across The Star Online