PETALING JAYA: AirAsia X Bhd
(AAX) expects air travel demand to remain resilient despite the ongoing Middle East conflict, says Hong Leong Investment Bank (HLIB) Research.
The research house said AAX remains confident of its cash flow and operational resilience, supported by healthy air travel demand and continued profitability across operations.
It maintained a “buy” call on the stock but revised its target price of RM2.20 from RM3.35 per share, noting that the share price has declined to an attractive level of RM1.22.
“AAX achieved a 9% net operating profit (NOP) margin during the January to February period before the Iran war started, but this was subsequently affected by higher fuel costs, resulting in a lower first quarter ended March 31, 2026 (1Q26), NOP margin of 3%,” it said.
The airline reported weaker-than-expected core profit after tax and minority interests of RM62.6mil for 1Q26, despite consolidating Capital A Bhd’s aviation business during the quarter.
It noted that year-on-year (y-o-y) performance was impacted by RM100mil lower ancillary income due to a tactical pricing strategy, RM100mil higher marketing expenses from promotional and tourism campaigns, and RM200mil in additional fuel costs following the spike in jet fuel prices.
“Management has been gradually raising average ticket prices since March 2026, with fares now approximately 60% higher compared to pre-war levels,” it said, adding that the airline will also focus on higher-margin ancillary products to offset the sharp rise in fuel costs.
“At the same time, AAX is restructuring its route network and capacity through route consolidation and the removal of unprofitable services. The company has announced a 10% to 20% y-on-y capacity reduction for May to June 2026,” it said.
On fleet management, it said the airline has signed an agreement to acquire 150 A220-300 aircraft, with flexibility to expand the order to up to 300 units to support future growth.
The aircraft will be configured with 160 seats and will complement the airline’s existing A320, A321, and A330 fleet.
As part of its fleet optimisation strategy, AAX has also returned an additional six A320 aircraft, while taking delivery of new A321LRs in April and June 2026 to further enhance operational efficiency.
It cut its earnings forecast for financial year ending Dec 31, 2026 (FY26), to RM331mil from RM1.4bil, and FY27 to RM1bil from RM1.4bil, on lower capacity assumptions and higher jet fuel costs.
The airline also introduced FY28 earnings forecast of RM1bil.
