Air Asia

[stevem]

Clouds loom over Malaysian budget carrier AirAsia's future

KUALA LUMPUR, Malaysia (AP): It has been blue skies for Malaysia's no-frills carrier AirAsia since it begun flying five years ago, but dark clouds are looming on the horizon.

AirAsia, a top pick of foreign investors since it was listed in November 2004, is losing its shine as high fuel costs, weaker-than-expected profits, huge capital commitments and increasing competition threaten its growth, analysts say.

Its share price plunged 12.2 percent last week to 1.30 ringgit (US$0.36; euro0.30) on Friday -- the lowest level in 1 1/2 years -- after the government said it would allow rival Malaysia Airlines to offer discounts on domestic routes.

Some brokerages have downgraded the stock to a "sell'' amid concerns the move may trigger a price war and hurt AirAsia's earnings.

Foreign investors hold 45 percent of AirAsia, the region's largest budget carrier in fleet size.

"In the volatile airline industry, it is difficult to maintain a market darling status for too long,'' said Peter Negline, aviation analyst with JPMorgan Securities in Hong Kong.

"We believe AirAsia is about to lose this as its poor earnings track record, high oil prices, lackluster franchises, large capital expenditure program and increasing domestic competition all hit the company,'' he said.

AirAsia has grown phenomenally since it started operations in January 2002.

Profitable from Day 1, it now has more than 1,600 employees and flights to more than 100 destinations in eight Southeast Asian nations, China and Macau.

Signaling Chief Executive Tony Fernandes' big ambitions, the airline signed an agreement last year to buy 60 new Airbus A320s over the next five years for nearly US$4 billion (euro3.3 billion), with the option to buy another 40 of the same aircraft.

It also has two 49 percent-owned subsidiaries in Indonesia and Thailand. But soaring fuel costs have hurt AirAsia's profits. In the 2005 financial year, the carrier posted a net profit of 111.6 million ringgit (US$31 million; euro26 million) in its Malaysian operations, 30 percent below its official target.

In March, AirAsia received a boost after winning rights to take over the bulk of domestic air services from Malaysia Airlines from Aug. 1 under government efforts to help the national carrier cut losses and become profitable again by 2007.

Under the revamp, Malaysia Airlines will serve just 22 out of 118 local routes and was told to charge full fares.

But the joy was short-lived when the government made a U-turn in policy this month, allowing Malaysia Airlines to cut fares and setting the stage for a price war with AirAsia, which has protested the move.

Transport Minister Chan Kong Choy last week said the government made the decision to create fair competition and a "level playing field'' between the two airlines.

Despite dropping many routes, Malaysia Airlines still services the most lucrative markets and can now effectively compete with AirAsia in its economy class segment, analysts say.

"AirAsia has reached a crossroad,'' said Muhamad Khair Mirza, aviation analyst at AmSecurities. "It is operating in an environment that is not conducive to its growth.''

The immediate hurdles for AirAsia are to meet large financial commitments, balance its growth and profit target, and overcome competition from Malaysia Airlines, he said.

"AirAsia is no longer a growth earnings story. It can become a market darling again only if the government, or a local white knight, comes in to revive its fortune,'' he said. "Otherwise, the stock will remain lackluster.''

JPMorgan's Negline said the national carrier had been viewed as a "weak cousin'' of AirAsia but it is becoming a formidable foe thanks to major restructuring that has involved laying off staff, reducing capacity and selling noncore assets.

On the other hand, AirAsia may be growing too fast and faces new pressure, he said. "The low-cost carrier model thrives on simplicity, but AirAsia's business is becoming increasingly complex,'' he said.

AirAsia risks getting "indigestion'' from excessive expansion, new fleet addition and cash-flow burdens as high oil prices hit earnings, Negline said.

AirAsia chief financial officer Raja Mohamad Azmi Raja Razali said investors are disappointed by the government's about-turn but the company is still profitable and its cash-flow remains healthy.

"Perception has turned negative because investors fear the domestic air rationalization will hurt our business but fundamentally, nothing has changed,'' he told The Associated Press.

"There are growing pains from time to time but we will manage it in our stride. We are not slowing down in our growth, it's business as usual.''

Rising oil prices pose a big challenge but the airline could further raise its fuel surcharge and hedge its fuel requirements to cope with it, he added.



Let's hope that they can ride out this storm, as they have made air travel in SEA very affordable for the masses.

[Nicke]

They recently added an additional flight from Phuket-KL, which depart 16:00 every day.

AirAsia is indeed very good for competition here with very competive prices compared to the standard airlines. So I hope they will stay around for a long time.

[IRISH JONNY]

Are These Guys Reliable?
Do They Cancell Flites?
Is It Safe To Book Online With Them?
Has Any Members Flown With Them?
For My Trip From Phkt To Bkk .it Is 2 K Cheaper After Taxes Have Been Added.........ij

[Mav]

Originally Posted by IRISH JONNY

Are These Guys Reliable?
Do They Cancell Flites?
Is It Safe To Book Online With Them?
Has Any Members Flown With Them?
For My Trip From Phkt To Bkk .it Is 2 K Cheaper After Taxes Have Been Added.........ij

No
Yes
Yes
Yes

IJ....the birds are HOT....fly with em buddy

You will have ya c0ck out all trip l guarantee it

[steve w]

as long as you are not on a tight schedule they are ok,flown with them twice 1st flight 1 hour delay 2nd on time

[Nautilus]

Have not heard of any Air Asia flights being canceled.

I know they always delay flights, especially if it's a weekday.

Air Asia bought a lot of the Airbus A320.

I wont say it's comfy, but new. The leg room is really sad. But short distance flight, so i aint complaining.

Have to check the site regularly for new updates.

Currently if you book now, you can fly from KL to Phuket for as low as MYR 29.99 per way not including tax till March 07.

I tried booking that in December, but couldnt get it, mayb it's meant for off holiday season only.

[banger_chris]

Hi Gents!

I usually fly with Air Asia when i connect from KL to HKT and back. Flew them several times allready. Never had a problem with depature times etc. Last time i flew KL-HKT-KL was last February still from the Main KL Airport. I wonder how the service changes since KL Airport now has this Low Cost Terminal (KLCC).

They usually offer cheaper rates on their Internet Website. I havent booked anything last February to fly from KL-HKT. Called directly to their Airport Office in KL 2 hours before depature and still got the cheaper rate they promote on their website. Great Service indeed. Will fly them again this August-September. Plus loads of stunners on the planes! You guys wont be dissapointed.

cheers,

[Coyotee]

Originally Posted by Mav

No
Yes
Yes
Yes

IJ....the birds are HOT....fly with em buddy

You will have ya c0ck out all trip l guarantee it

Mav you are out of date....I always use Airasia for all my flights to LOS and the most they were late were 1/2 hr but most time they were on time...Phuket flights they use the new Airbus!

[sundancekid]

I've used them too with only minor delays. As has been stated, use them if you're not on a tight schedule.

Originally Posted by Coyotee

Mav you are out of date....I always use Airasia for all my flights to LOS and the most they were late were 1/2 hr but most time they were on time...Phuket flights they use the new Airbus!

At least the birds are still not "out of date"...

[beuk]

I never had probs with them always on time and cheap. Except for the flight to BKK this year. Normally we would have left around noon but when we checked in they said the plane was under repair. They then said that we could get the next flight. No prob so far just had to wait for an hour or two in Phuket airport. Then it started the next flight was delayed by two more hours. That was not pleasant at that moment spending so many hours in Phuket airport. On the otherhand the staff was very friendly and offered us coupons of 80 bath to buy food. It`s not much but at least it is a nice gesture for the inconvienence.
They also asked if we had a connection flight to catch. We didn`t had one but I wonder what they did with people who had to catch a connection.

[IRISH JONNY]

Originally Posted by beuk

They also asked if we had a connection flight to catch. We didn`t had one but I wonder what they did with people who had to catch a connection.

THEY WOULD HAVE PROBABLY TRIED TO GET THEM THERE WITH ANOTHER AIRLINE..........

[landofsmiles]

Came back myself on AK876 last week on a visa run from Kuala Lumpur. An epic journey. At 1430 they announce delay due operational reasons to 1730. At 1730 call everyone to the Gate and we think we are leaving...but no, it's to give us a BigMac or McChicken sandwich! and a bottle of water and say they don't know how much longer the delay will be. 1800 they announce delay due to late arrival of inbound aircraft and it's due 1830 and we should leave 1855. We get airborne 1930. Fly perfectly smoothly for about 1/2 an hour but strangely the seatbelt fasten sign stays on and the cabin staff remain seated...no announcement of any sort.

Then we hear the undercarriage being lowered, then the Captain comes on and tells the cabin staff to be seated for landing!! Still no announcement from stewardess or the Captain...we land and looking out the window clearly we have not landed at Phuket!...we're taxiing in and at last the stewardess comes on and says "Yes, we are back at Kuala Lumpur. The Captain will advise what is happening when we are on the stand."

We pull up...engines kept running...Captain comes out of flightdeck and takes the mike and stood in front of us....fair play to him....said "one of our company aircraft is down today in Phuket (to some this may have sounded like one had crashed, but he meant one had a technical problem) and the company thought there was an engineer there who could sign it back on after repair, but there wasn't and so we were ordered back to pick one up!" As he says those last few words the door opens and in walks the engineer to cheers and clapping. 15 minutes later we taxi out again and finally arrive in Phuket at 2015...only 5 hours late

Not all flights are like this but having been a steward myself for a few years I have to say the crew/passenger communication was pretty p$ss poor!!

Won't stop me using them though. Probably go to KL most months. 3400baht return including taxes is very reasonable.

HKT-KUL flight schedule is here http://www.phuket-info.com/forums/ex...visa-runs.html

[stevem]

Interesting times ahead for Air Asia. They have just converted 40 A320 options and have optioned another 30. They are expanding services into China and are also talking about Perth.

[dawsey]

Originally Posted by stevem

Interesting times ahead for Air Asia. They have just converted 40 A320 options and have optioned another 30. They are expanding services into China and are also talking about Perth.

Do you reckon they are looking to open up other routes because of the decision to let Malaysian Airlines offer discount fares on Air Asias routes into LOS?
Makes sense to me anyway. You have to expand if you want to grow and stay competitive.
Thats a lot of aircraft to keep in the skies.

[stevem]

Definitely, once they start receiving more aircraft deliveries expect to see further expansion. I dont know where they are getting crew from as there is a worldwide drought of airbus captains at the moment. You can basically sit anyone in the right hand seat, but the left hand seat is another matter all together.

Will be interesting to watch and see what happens over the next 6 months. Together with Air Asia and now Jetstar from Oz going International, I think airfares will only get cheaper around SE Asia.

[Nautilus]

Most of Air Asia crew are ex Malaysian Airline crew.

Air Asia is also hiring a lot of cabin crew, huge advertisments in papers nearly everyday.

[stevem]

Originally Posted by Nautilus

Most of Air Asia crew are ex Malaysian Airline crew.

There arent enough ex MH drivers to cover what AK have on order. There are Japanese coming onboard to drive the F50's with FAX. So I guess they will need to look at the work rules and allow some expat drivers in for the interim.

[Nautilus]

Yeap and a lot MH pilots jump ship to Emirates already.

Got a few pilot friends, but too bad they migrated already.

Havnt been flying MH for many years, just wont support them after all the saga involving them. Stupid management.

Still prefer SQ and their Krisflyer points rocks!!!

[IRISH JONNY]

Originally Posted by Nautilus

Still prefer SQ and their Krisflyer points rocks!!!

AGREE..........IVE 30000 MILES ALREADY WITH ANOTHER 15 TO COME IN OCTOBER .....5555555............
IJ

[Ozskin]

Sorry to say i have had nothing but delays delays and more delays with air asia. Yes i know they are cheap, and you get what you pay for. Legroom room not bothered, service not bothered. Apart from landing in one piece about the most important thing about an airline is to arrive on time or close to it.

Flew BKK - HKT 23rd july - Delayed by approx 3 hrs
Flew HKT - BKK 2nd aug - Delayed by approx 3 hrs

Last trip i was delayed by 5+ hrs Ubon - BKK, on 2 occasions.

Be very careful on baggage too. Strictly 15kg. I have been over this slightly and on some occasions been charged, and on other times nothing.

Also if u book online try to include a mobile number in thailand, you can be reached on, as to their credit they will sms you about cancelled flights the day before..... I would never use air asia if i had to make a connecting flight, too unreliable. They offer more of a same day service.

Personally i have had much better experiences with Nok Air. Although they are a little more expensive i think i will try to use them more.

Regards
ozskin

[barfly]

Is 15kg the same allowance for all the low cost airlines that fly BKK-HKT? That would stop me using them.

[Ozskin]

Originally Posted by barfly

Is 15kg the same allowance for all the low cost airlines that fly BKK-HKT? That would stop me using them.

Nok Air is also 15kg. Ok for some but many international travellers may carry more.

I know Nok Air offer Nok Plus which is like their business class section, for about 500 baht more than the standard fare (probably still cheaper than thai). You get 30kg allowance, and a few other extras, including seat allocation.

Air asia is one class and free seating.

I have found with Air Asia 15kg is overlooked sometimes if u are just over, but they charge 85 baht per kilo over 15kg, if u are too far over you will pay. Sometimes it can cost you more than a thai airways or Nok Plus fare would have been.

regards
ozskin

[barfly]

Thanks. I'll look into Nok Plus.