AirAsia Bhd and AirAsia X Bhd's shares surge on potential route recalibration exercise news

January 12, 2018 | By | Reply More

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KUALA LUMPUR: Investors may have been excited with news of a potential route recalibration involving AirAsia Bhd and AirAsia X Bhd, which pushed the budget airlines’ shares higher today.

Aviation analysts, however, said the possible exercise will likely see only minimal cost savings.

They believe there would only be marginal recalibration benefit between AirAsia and its affiliate AirAsia X, saying that both had already established their markets for medium and long hauls segments.

“Both airlines have their existing routes that have already being split into two different markets,” one analyst told NST Business.

Shares of AirAsia and AirAsia X rose in active trade yesterday’s morning following a series of tweets from AirAsia Group chief executive officer Tan Sri Tony Fernandes.

At 9.22am, AirAsia was up 1.06 per cent to RM3.81 with 1.83 million shares traded, while AirAsia X edged up 0.5 sen to 38.5 sen with 6.33 million shares done.

At the close of trading, AirAsia shares rose five sen to RM3.82 with 15.01 million shares changing hands. AirAsia X shares improved one sen to 39 sen with 32.72 million shares transacted.

Fernandes, in his tweet, said AirAsia would be transferring routes that are over four hours to AirAsia X as AirAsia has matured and can use the capacity for the more profitable shorter haul routes.

He described the exchange of routes as a “win win” for both airlines followed by tweets of his prediction that this year would be good for AirAsia X with a further route reallocation and reduction in costs.

“Cleaning up the balance sheet in AirAsia X as we started the fourth quarter. 2018 looking good,” Fernandes tweeted.

He pointed out that AirAsia X was not interested in the long haul market, like Berlin and London among others, as the airline felt the market was not ready, and would remain firmly focused on medium haul routes.

Another analyst said while AirAsia takes on routes less than four-hour and AirAsia X more than four-hour, any routes not within that category will probably be limited.

“Most of the routes are already less than four hour at AirAsia. I don’t think there are many routes more than four-hour as most of it has been transferred to AirAsia X.

“They were initial plans to have expansion to Europe but given the heavy competition, it decided not to introduce. It was a very wise decision made,” the analyst said.

AirAsia is expected to maintain its four-hour route destinations while AirAsia X will continue to have many routes with more than four-hour flights.

Nevertheless, industry analyst felt the potential recalibration make the airlines’ operations more efficient.

Another analyst said there are very few AirAsia routes of over four hours.

AirAsia and AirAsia X have always had a rule splitting their routes at under and above four hours, he said, adding that there a couple of routes AirAsia now does – just above four, and some of these may be given to AirAsia X.

“However, this was already decided last year and represents a very small portion of the overall AirAsia network. Hence, it is not really significant,” he said.

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