KUALA LUMPUR: The suspension of AirAsia X’s services to Paris Orly and London Gatwick, as well as its flights to Mumbai and New Delhi, bodes well for Malaysian Airline System Bhd (MAS), say analysts.
“Such reorganisation is positive for MAS for sure, which possibly explains why MAS’ share price has been on an uptrend,” OSK Research analyst Ahmad Maghfur Usman told The Edge Financial Daily yesterday.
But the long haul low-cost associate of AirAsia Bhd is not completely on the losing end. Ahmad said MAS has been reducing the lucrative Sydney route for AirAsia X, which would be good for the latter to realise better profitability.
“Overall, I don’t see much impact on AirAsia in terms of passenger feeds as typically the passengers from Europe would not fly a low-cost carrier for long haul flights. I’ve always been a firm believer that doing a low-cost carrier model for the long haul segment would be tough to pull off anyway,” he said.
Another analyst with a local bank-backed research firm concurred, saying that AirAsia X’s network reorganisation could have a positive impact on MAS, which has London as its most profitable and high-yield route.
Since Dec 30, 2011, MAS’ shares have increased 24% to close at RM1.62 yesterday. Air- Asia saw its shares close one sen or 0.27% lower at RM3.68 yesterday with 3.4 million shares changing hands.
The suspension of these flights comes as part of AirAsia X’s network consolidation exercise to improve its operating cost efficiencies and focus on markets where it can build a leadership position in 2012, said the company in a statement yesterday.
“The continued high jet fuel prices and the weakening demand for air travel from Europe, brought about by the current economic situation together with exorbitant government taxes, have placed cost pressures on operating long haul low-cost flights between Asia and Europe, compromising our ability to offer the low fares AirAsia X is known for,” AirAsia X CEO Azran Osman-Rani said in a statement.
Other rationales include the implementation of the European Union’s Emissions Trading System and the escalating Air Passenger Duty taxes in the UK, which are set to rise again in April, he added.
Apart from that, Azran said visa restrictions for travel between India and Malaysia, and the increase in airport and handling charges in India, resulted in a “structure not conducive to the low-cost model”.
But he said AirAsia X could reinstate the Mumbai and New Delhi services after these issues are resolved.
The airline’s four times weekly Kuala Lumpur to Paris service will be suspended on March 30 and the six times weekly London service will be suspended on March 31. The four times weekly Mumbai services will be suspended on Jan 31, and the daily service to New Delhi will be reduced to four times weekly in March and suspended from March 22.
Reuters, meanwhile, quoting Thai AirAsia CEO Tassapon Bijleveld, yesterday reported that the Thai unit of AirAsia would submit a filing for its initial public offering this month and plans a Bangkok listing in the first quarter.
This article appeared in The Edge Financial Daily, January 13, 2012.
“Such reorganisation is positive for MAS for sure, which possibly explains why MAS’ share price has been on an uptrend,” OSK Research analyst Ahmad Maghfur Usman told The Edge Financial Daily yesterday.
But the long haul low-cost associate of AirAsia Bhd is not completely on the losing end. Ahmad said MAS has been reducing the lucrative Sydney route for AirAsia X, which would be good for the latter to realise better profitability.
“Overall, I don’t see much impact on AirAsia in terms of passenger feeds as typically the passengers from Europe would not fly a low-cost carrier for long haul flights. I’ve always been a firm believer that doing a low-cost carrier model for the long haul segment would be tough to pull off anyway,” he said.
Another analyst with a local bank-backed research firm concurred, saying that AirAsia X’s network reorganisation could have a positive impact on MAS, which has London as its most profitable and high-yield route.
AirAsia X's suspension of services to Paris and London is part of a network consolidation exercise to improve its operating cost efficiencies and focus on markets where it can build a leadership position.
Since Dec 30, 2011, MAS’ shares have increased 24% to close at RM1.62 yesterday. Air- Asia saw its shares close one sen or 0.27% lower at RM3.68 yesterday with 3.4 million shares changing hands.
The suspension of these flights comes as part of AirAsia X’s network consolidation exercise to improve its operating cost efficiencies and focus on markets where it can build a leadership position in 2012, said the company in a statement yesterday.
“The continued high jet fuel prices and the weakening demand for air travel from Europe, brought about by the current economic situation together with exorbitant government taxes, have placed cost pressures on operating long haul low-cost flights between Asia and Europe, compromising our ability to offer the low fares AirAsia X is known for,” AirAsia X CEO Azran Osman-Rani said in a statement.
Other rationales include the implementation of the European Union’s Emissions Trading System and the escalating Air Passenger Duty taxes in the UK, which are set to rise again in April, he added.
Apart from that, Azran said visa restrictions for travel between India and Malaysia, and the increase in airport and handling charges in India, resulted in a “structure not conducive to the low-cost model”.
But he said AirAsia X could reinstate the Mumbai and New Delhi services after these issues are resolved.
The airline’s four times weekly Kuala Lumpur to Paris service will be suspended on March 30 and the six times weekly London service will be suspended on March 31. The four times weekly Mumbai services will be suspended on Jan 31, and the daily service to New Delhi will be reduced to four times weekly in March and suspended from March 22.
Reuters, meanwhile, quoting Thai AirAsia CEO Tassapon Bijleveld, yesterday reported that the Thai unit of AirAsia would submit a filing for its initial public offering this month and plans a Bangkok listing in the first quarter.
This article appeared in The Edge Financial Daily, January 13, 2012.
