KUALA LUMPUR: AirAsia group of companies is again the best-performing low-cost carrier (LCC) stock in Asia Pacific.
AirAsia Bhd and AirAsia X Bhd took the top two positions after registering 17.01 per cent and 16.67 per cent in year-to-date (YTD) share price returns, according to Bloomberg Intelligence.
India-based InterGlobe Aviation Ltd came in third with a YTD gain of 7.05 per cent.
BI data also revealed that the 2017 sales growth year-on-year of AirAsia and AirAsia X standing at 41.8 per cent and 13.9 per cent, with return-on-equity of 21.8 per cent and 9.7 per cent respectively.
A BI analyst said Asia-Pacific airlines' stock performance so far this year had been solid, driven by robust year-end profitability and risks of runaway oil prices fading.
“Strong passenger-traffic growth across the region will keep Asian airlines' valuations elevated as investors focus on positive longer-term growth fundamentals.”
However, he said significant capacity additions by aggressive Chinese airlines and LCCs will keep pressuring passenger yields, followed by continued cost challenges and rising fuel prices might crimp already thin margins.
Crucial Perspectives analyst Corrine Png said AirAsia and its LCC peers should not expand their aircraft fleet too aggressively, citing that better capacity management will enable them to maximise yields and profitability.
“LCCs should focus on boosting their ancillary services and seek alternative streams of income. We see significant revenue upside in the collection and monetisation of passenger data,” she told NST Business yesterday.
Png said LCCs can achieve exponential gains in data monetisation by combining their passengers’ existing Preflight data with the Inflight Big Data and analysing all that in real time with cloud computing.
“Based on our estimates, AirAsia can potentially boost its net profit by RM574 million per year if it can successfully collect and monetise its big data. Valuing AirAsia at 20x P/E would imply a fair value of RM13 per share, three times its current share price,” she added.
Maybank Investment Bank aviation analyst Mohshin Aziz said LCC should not be adding more wide-body aircraft to expand its long-haul flights.
“LCC has been supported by using narrow-body aircraft. Wide-body aircraft for long-haul flights operated by airlines like AirAsia X and Norwegian Air, have proven to be not successful,” he said.
Mohshin said other LCCs that use wide-body for thier long-haul flights have performed very badly such as Cebu Pacific in the Philippines.
“It has proven to be mixed result as most of the routes didn’t work. The airline has given up on that idea of using wide-body plane for long-haul flights,” he said.
Mohshin said global trend of fuel prices are very volatile this year, citing that it will squeeze airlines margins.
“AirAsia only hedged 15 per cent fuel for its full year 2018’s requirement. It is not sufficient.”
MIDF Research aviation analyst Danial Razak said AirAsia shares particularly had been performing well especially last year.
“The airline will add about 35 aircraft this year. It bodes well with the increasing demand for its potential destination in China and Korea,” he said.
AirAsia shares closed 7.89 per cent or 1.5 sen higher to 20.5 sen yesterday, while long-haul budget airline AirAsia X eased 1.3 per cent to 38 sen.