Fuel surcharges abolishment unlikely to cause sharp drop in AirAsia's yields
Published on: Wednesday, January 28, 2015
Kuala Lumpur: Low cost carrier AirAsia's move to abolish fuel surcharges on the back of a sharp drop in jet fuel prices is not expected to cause a sharp drop in the company's yields.RHB Research Institute, in a research note, said the downside would not be severe as underlying yields have already hit 2008 global financial crisis lows since financial year 2013.It said with local rival Malaysia Airlines' trimming capacity, notably on domestic flights, demand was outstripping supply and thus cushioning the downside impact on yields from the fuel surcharge abolishment.
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"We now expect yields to drop by two per cent, year-on-year, from an earlier expectation of a five per cent increase," it said.It added that other adjustment made include a wider share of losses at Indonesia AirAsia to RM100 million from RM30 million forecast earlier.Meanwhile, in a separate statement, RHB Research said AirAsia's long-haul affiliate, AirAsia X, could increase its air fares to offset the fuel surcharge removal.It said it was unlikely that AirAsia X would be able to afford a further cut in yields as this could deepen the risk of it incurring losses.
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"Nonetheless, the overall impact would lower our financial year 2015 overall yield growth estimate to six per cent from eight per cent, previously," it said.The lower jet fuel costs could also result in the carrier recording a small core net profit in financial year 2015.
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