KUCHING: The recent decision made by AirAsia Bhd (AirAsia) to defer deliveries of ten A320 aircraft from 2012 to 2015 was generally seen by analysts as a good decision, bearing long term benefits to the low cost carrier.

GROWING ITS FLEET: ECM Libra believes that most of these aircraft will be deployed in Thailand and Indonesia in order to grow the associates’ fleet size in line with their increase in flight frequencies and additions of new routes.

In its research report yesterday, ECM Libra Capital Sdn Bhd (ECM Libra) believed the decision was made to allow the group to switch from its order of the classic Airbus A320s to a newer variant, the A320 NEO (New Engine Option), which was designed to reduce fuel consumption by eight to 15 per cent.

The research firm recalled that AirAsia had agreed to a firm order of 175 Airbus A320s to be delivered between December 2005 and October 2014.

So far, the group had taken delivery of 16 A320 aircraft in 2010 and was looking at eight more this year.

“Most of these aircraft will be deployed in Thailand and Indonesia, in order to grow the associates’ fleet size in line with their increase in flight frequencies and additions of new routes,” ECM Libra said.

“The 14 aircraft expected in 2012 will be mainly for its joint ventures in the Philippines and Vietnam.” In another report, OSK Research Sdn Bhd (OSK Research) made no change to its earnings estimates as the aircraft delivery was within its assumptions.

“This included an average 12 aircraft being deployed in 2012, taking into consideration that some of the aircraft will be delivered towards the year-end before the peak travel period,” the research team reported.

“Note that we have yet to incorporate income contributions from the newly set-up Philippines
venture, pending clarity from management on its capacity guidance and route offerings.

“Also, we gather that AirAsia is still hopeful of expanding to Vietnam.

“We are positive on this move should this materialise as this will give AirAsia full coverage of the Asean space.” Analysts at Kenanga Investment Bank Bhd (Kenanga Research) did not expect AisAsia to impose a fuel surcharge at the current crude oil price (US$90 to US$100 per barrel) as the firm believed that the ancillary income would be enough to mitigate such impact to its earnings.

“Based on our numbers, we see that AirAsia will opt to impose the fuel surcharge when the crude oil price shoots up higher than US$120 per barrel.”

“We are not entirely expect Thai AirAsia (TAA) will be settled by cash upon listing as we opined that it will be used to set-off its 49 per cent stake in TAA.

“Hence, we do not expect any cash dividend for at least the next two years,” it concluded Kenanga Research.

Based on this, Kenanga Research, ECM Libra and OSK Research pegged a target price of RM3.08 per share, RM3.50 per share and RM3.78 per share respectively.