By Stephanie Jacob
AmResearch believes the decision by the Land Public Transport Commission (SPAD) to allow an increase express bus fees by an average of 22%, could be a positive catalyst for airlines such as AirAsia Bhd.
“The increase in express bus rate narrows the price differential between the two modes of transport quite substantially, and in fact, depending on actual date of travel and destination, air fares can be even cheaper or comparable (see exhibit 1) based on our comparison with flights a week from now,” said the research house.
Furthermore, the fact air travel significantly shortens travel time for passengers when compared to land transport options will help make air travel more attractive.
It highlighted that one of Malaysia’s largest bus operators, Konsortium Transnasional carries around 6 million passengers annually, which was about 30% of AirAsia’s total traffic for financial year 2014.
Given the low cost carrier derives around half of its revenue from the domestic market, it could be a beneficiary if passengers start to look for substitutes to land transport options.
AmResearch also highlighted that AirAsia’s group chief executive officer Tony Fernandes has indicated a possible revisit of Indonesia AirAsia and AirAsia Philippines initial public offerings (IPOs).
Although more details are needed such a move would generally be positive as the associate companies will be able to unlock value, recapitalise, and reduce reliance on financial support from Airasia Bhd, it said.
Potential IPOs could also reduce the amounts these associate companies owe to its parent company which is around RM2 billion as at the fourth quarter of 2014, added the research house.
Furthermore, AirAsia’s RM1 billion perpetual sukuk programme announced in October 2014 could help strengthen the airline’s equity levels, this along with the potential sale of four aircraft in financial year 2015 could help improve its balance sheet
AmResearch has maintained its “buy” call on AirAsia Bhd at an unchanged fair value of RM3.30 per share.
As at 12.05pm on Bursa Malaysia, AirAsia Bhd was trading unchanged at RM2.23.
You must be logged in to post a comment.