AirAsia plane deferment not to affect growth plan

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KUCHING: The recent deferment of AirAsia Bhd’s (AirAsia) seven A320 Airbuses to 2015 would not materially affect its growth plan in Malaysia, an analyst said.

CONSEQUENTIAL POSTPONEMENT: The delivery schedule, originally set to be delivered this year, was deferred on the basis of infrastructural constraints caused by the pending completion of the new low cost carrier terminal (LCCT).

CONSEQUENTIAL POSTPONEMENT: The delivery schedule, originally set to be delivered this year, was deferred on the basis of infrastructural constraints caused by the pending completion of the new low cost carrier terminal (LCCT).

“Despite the lower aircraft delivery, we believe that a 12.5 per cent per annual growth in available seat per kilometre in Malaysia is still attainable,” affirmed an analyst from RHB Research Institute Sdn Bhd (RHB Research) yesterday.

“We believe that the airline sector is poised for improved prospects over the medium term in line with the recovery in the global economy,” he highlighted.

“AirAsia, in particular, is an attractive proxy for this recovery given its recent move to adopt a more ‘disciplined’ growth strategy to ensure that its gearing level is in check. This will allow AirAsia to deliver more consistent earnings.”

The research analyst affirmed that the recent amendment

agreement with manufacturer Airbus SAS to reschedule the delivery of seven A320 planes would not incur any penalties.

“Based on the revised new aircraft delivery schedule, we now project AirAsia’s fleet size to only increase from 80 as at the

end of the first quarter for the financial year ending December 2010 to 94 as at the end of December 2011,” he revealed.

OSK Research Sdn Bhd (OSK Research) in its report yesterday highlighted that the delivery schedule, originally set to be delivered this year, was deferred on the basis of infrastructural constraints caused by the pending completion of the new low cost carrier terminal (LCCT).

This postponement was also aimed at managing its net gearing which stood at 2.25 times as at March 2010 on top of removing concerns of potential idle costs in the event of low utilisation.

OSK Research suspected some capacity allocation on the part of Thai AirAsia was possibly in the works, taking into account the recent collaboration between Thai Airways and Tiger Airways which was expected to lead to intensified competition in the region.

RHB Research shared this view, noting that this move was more likely to affect the expansion plans of associates Thai AirAsia and Indonesia AirAsia.

The group was expected to gradually take back the financial and non-financial support lent to Thai AirAsia, Indonesia AirAsia and AirAsia X through a debt raising exercise in their own capacity or initial public offerings.