AirAsia soars again, after Java Sea tragedy

The budget airline’s share price has gone up and it has big plans for growth, including expanding its China and Japan markets and a possible listing in Hong Kong.

KUALA LUMPUR: Twenty-months after an AirAsia flight crashed in the Java Sea, the airline is soaring again. It has big plans for expansion into the China and Japan markets.

Noting that low-cost carriers make up 56 per cent of the seats flown in the region, compared with 11 per cent in Northeast Asia, the company has set up North Asia, a Hong Kong-based subsidiary.

North Asia President Kathleen Tan told the Nikkei Asian Review that “North Asia with China, South Korea, Japan and Taiwan  is considered a high growth region” for no-frills flyers.

Tan said demand for regional travel was high, partly due to the proximity of the countries and cultural similarities.

The Nikkei Asian Review quoted AirAsia group CEO Tony Fernandes as saying he would pursue more connections to second-tier Chinese cities.

“I can confirm China is a market we will love to be in. We are not interested in Beijing or Shanghai or those big metropolises. What AirAsia is good at is developing those secondary and tertiary routes, and those are what we are looking at.”

Fernandes said AirAsia’s forte was “providing connectivity where there isn’t any connectivity and providing economic growth where there isn’t any economic growth.”

Since it wants to avoid directly competing with both full-service and budget carriers that have already established hubs in the country, it may take the joint venture route. It has been approached by Chinese companies in this regard.

“We need to attract a new form of capital and awareness of AirAsia,” Fernandes said in Farnborough, adding that a Hong Kong listing could help AirAsia accomplish these goals. “It is something we are investigating,” he was quoted as saying by Nikkei Asian Review.

The carrier is also getting ready to start crisscrossing Japan again. It has received two A320s, and Tan said the group hoped to begin test flights this month.

Pending regulatory approval, it hopes to begin commercial flights from its base in Nagoya come January.

But this is just one area, although a big one, that shows confidence has returned to AirAsia after one of its planes crashed in the Java Sea on Dec 30, 2014, claiming 162 lives.

The report said that Fernandes was not only playing a bigger role in the company, he was aggressively charging towards a new phase of growth. He has carried out several changes, including bringing back its Asean headquarters to Kuala Lumpur from Jakarta.

Fernandes has also raised his stake in AirAsia from 18.9 per cent to 32.4 per cent through Tune Live, a private company co-owned with Kamarudin Meranun, who co-founded AirAsia with Fernandes. The new share issuance will raise RM1 billion, which will be used to pare debt and as capital expenditures, according to the report.

On July 12, AirAsia announced an order of 100 Airbus A321neo passenger aircraft. The purchase lays bare a bold expansion plan for the no-frills flyer that in 2015 had 172 aircraft.
Fernandez had said with these aircraft “we will hit 100 million passengers in the not-too-distant future.”

The group, which has associate carriers in India, Indonesia, the Philippines and Thailand, ferried 51 million travellers last year, according to the report.
The Java Sea tragedy, coupled with intense competition from new budget carriers resulted in falling fares.

Amid all this, the report said, AirAsia was accused of tweaking figures to boost earnings. As a result, the company’s stock price last August caved in, falling to a low of RM0.78.

“Many people were writing off AirAsia, but we stuck to our guns,” Fernandes recalled. “We have moved from a Southeast Asian airline to an Asian airline.”

And AirAsia’s share price has bounced back. On Tuesday, the shares closed at RM2.95, the highest they’ve been since two days before the crash.

Cheaper fuel prices, which have buoyed the entire aviation industry, and a reshuffling of routes have contributed to the recovery.

The shares finished the week at RM2.97, according to the Nikkei Asian Review.