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AirAsia in cost-cutting drive, says CEO

Publication Date : 13-02-2014

 

AirAsia Bhd’s group chief executive officer (CEO) Tony Fernandes unveiled the latest initiative of installing self-service machines as check-in counters via several pictures on Twitter on Wednesday.

Fernandes noted that this would be the “first of its cost-reduction methods”.

“(The machines) do not require document checks (when checking in) as long as you don’t need a visa,” he said in a separate Tweet.

On a related matter, he urged suppliers to “be efficient and lower costs”, adding that the company aimed to take 7.5% of cost out to make flying more affordable.

His series of Tweets follow some analysts’ subdued expectations of its fourth-quarter and financial year ended Dec 31, 2013 (FY13) financial results, which are due to be released by the end of the month.

“We believe AirAsia’s FY13 results will likely be below our and consensus earnings expectations. However, we are maintaining our earnings forecast, pending the release of AirAsia’s fourth-quarter FY13 results,” Alliance Research’s Tan Kee Hoong wrote in a report on Wednesday.

Alliance Research, however, has a “buy” recommendation on the counter, with a target price of 3.18 ringgit (US$0.96) with a potential capital upside of 37.7% which are “subject to review with a downside bias”.

These assumptions were based on AirAsia’s preliminary operating statistics for the fourth quarter, which were released on Monday.

The data overall showed that Malaysia AirAsia and Indonesia AirAsia’s operational data were in line with expectations, while Thai AirAsia’s (TAA) data was weaker than expected, as travel demand was dampened by political uncertainty.

“TAA’s load factor declined to 80.6% in the fourth quarter, as it took delivery of four aircraft during the quarter. As a result, TAA’s FY13 load factor was only 83.6%, a shade below our expectations of 84%,” noted Tan.

The overall analyst community, meanwhile, is still mildly bullish on the stock, with 60.7% favouring it with a “Buy” call, 28.6% with a “Hold” call and another 10.7% rating it a “Sell”. The overall consensus rating price target was four ringgit ($1.20).

Meanwhile, AirAsia Expedia (AAE) CEO Kathleen Tan denied any fall-out of the joint venture (JV) between AirAsia and the world’s largest online travel agency (OTA) Expedia.

When asked if reports about both companies pulling out of the JV were true, she told The Star's StarBiz: “As long as I am here, this will continue”.

She added that AAE had turned around in 2013 and achieved a triple-digit growth to end the year with a gross booking value of S$2 billion (US$1.5 billion).

AAE operates in the Asian market, with two OTAs under its belt – Expedia and AirAsiaGo. Both units have grown 120% and 108%, respectively.

Fernandes had said on his Twitter account last month that “AAE (is) already beating profit forecasts. Will be as big as AirAsia one day”.

 

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