KUALA LUMPUR: AirAsia Bhd shares and counters related to the low cost carrier were actively traded this morning following the disappearance of an affiliate flight yesterday.
At 10.04 am, AirAsia shares shed 22 sen or 7.4 per cent to RM2.72 with 50.85 million shares changing hands.
Long haul low cost carrier, Air Asia X Bhd, shares declined four sen to RM64.5 sen with 26.74 million shares changing hands.
The shares of insurance provider Tune Ins Holdings Bhd, fell almost eight per cent or 14 sen to RM1.62 with 7.82 million shares traded.
Affin Hwang Investment Bank said the disappearance of an airplane operated by AirAsia’s 49 per cent associate Indonesia AirAsia is expected to trigger a knee-jerk reaction to the low cost carrier’s share price.
In the long-term, it said the potential impact from the unfortunate event includes a dent to the group’s overall reputation and branding, persistent strong fare competition in order to encourage ticket sales, and further deterioration to the group’s yield.
“Based on our assumptions, every RM1 drop in average ticket sales potentially cuts our 2015 earnings estimate by three per cent, all things equal,” it said in a research note today.
However, Affin Hwang Investment remained optimist over the airlines’ safety procedures and performance record.
While, it deemed the tragedy as very unfortunate, the investment bank believes any weakness in share price would be an opportunity to accumulate.
Hong Leong Investment Bank (HLIB) in a separate note said the latest incident is likely to have a deep impact on regional air travel sentiment after the previous two incidents involving Malaysia Airlines in March and August.
“Our expectation of potential air travel demand recovery in 2015 in now hampered by the latest air incidents,” it said.
The investment bank also said it is now turning more cautious on the outlook for air travel demand, at least in the near term, and any meaningful rebound may only be realised in 2016.
HLIB said while, AirAsia’s liability is likely to be fully covered by insurance with no direct impact to its finances anticipated, the airline and its affiliates, including AirAsia X, are expected to further cut yields in 2015 to stimulate air travel demand, leveraging on the low jet fuel price.
It cut assumed yields for financial years 2015 and 2016 by five per cent and one per cent respectively, to account for the weakening demand.
“As a result, the financial year 2015-2016 earnings have been cut by 17.6 per cent and 3.8 per cent respectively,” it said.
Affin Hwang Investment has maintained a “buy” call and target price of RM3.25 for AirAsia.
Meanwhile, HLIB has downgraded AirAsia to “trading sell” with a lower target price of RM2.64. – Bernama