PETALING JAYA: AirAsia Group Bhd is poised for an earnings recovery in the coming quarters, with improving yields, a leaner cost structure and a seasonal demand rebound expected to support a stronger fourth quarter ending Dec 31, 2026 (4Q26), says Hong Leong Investment Bank (HLIB) Research.
The research house maintained a “buy” call on AirAsia, but lowered the target price to RM1.86 from RM2.20 based on 10 times mid-financial year ending Dec 31, 2027 (FY27) earnings.
HLIB said it sees the current share price as “an attractive entry point ahead of a potential 4Q26 earnings recovery”.
AirAsia reported a core loss attributable to the group of RM167mil in 2Q26, dragging its first half into a core loss of RM104.4mil.
HLIB Research said the group was severely affected by the Iran war since March, which pushed up jet fuel costs and weakened air travel demand.
Average jet fuel prices rose to US$183 per barrel in 2Q26 from US$110 per barrel in 1Q26 and US$86 per barrel a year earlier.
The group offset part of the impact through higher fares and cost controls.
Average fares rose 16.1% quarter- on-quarter (q-o-q) and 21.3% year-on-year (y-o-y) through dynamic pricing and fuel surcharges, while non-jet fuel costs fell 6.5% q-o-q and 7% y-o-y.
AirAsia also reduced capacity by 19.5% q-o-q and 11.6% y-o-y by cutting unprofitable routes, while returning 25 aircraft during the quarter at favourable terms.
For 3Q26, HLIB Research expects AirAsia to maintain a lean capacity structure, with capacity down 20% to 25% y-o-y amid seasonally weaker demand.
Jet fuel prices have eased to approximately US$140 to US$150 per barrel from a peak of US$220, while management continues to use US$160 per barrel as its pricing assumption, providing a US$10 buffer to protect margins.
HLIB Research forecasts core profit after tax and minority interests of RM331mil for FY26 and RM1bil for FY27.
