AirAsia stocks slump in Malaysia

AirAsia stocks slump in Malaysia

Monday, December 29, 2014 5:55 am

Shares in AirAsia, Southeast Asia’s biggest budget airline, lost almost eight percent on Monday in Kuala Lumpur after one of its jets disappeared with 162 people on board.

The firm slumped 12 percent to 2.60 ringgit at the open but recovered slightly to sit at 2.71 ringgit, still down 7.82 percent, by 0315 GMT.

The Airbus jet disappeared en route to Singapore from Surabaya in Indonesia’s east Java after the crew requested a change of flight plan due to stormy weather. Indonesia’s National Search and Rescue Agency said it is likely at the bottom of the sea.

However, Shukor Yusof, founder of aviation research firm Endau Analystics told AFP investors and creditors will remain firmly behind AirAsia and its CEO Tony Fernandes, who transformed a floundering carrier into Asia’s most successful budget airline.

“The market reaction is quite natural. I am not surprised,” he told AFP, adding: “I think investors confidence will return quickly since the airline has a solid business model.”

Indonesia resumed a sea and aerial search at dawn Monday for the Airbus A320-200 plane that went missing in the Java Sea Sunday morning.

Five aircraft will be sent to search for the plane, including two C-130 military transport aircraft and a Boeing 737, Indonesian air force spokesman Hadi Cahyanto told AFP.

Economist Yeah Kim Leng, dean of Malaysia University of Science and Technology School of Business, said any impact on the share price will be short-lived since there was nothing to stop the growth of the aviation industry in Asia.

“This incident will not dampen air travel on AirAsia because it is a budget carrier which appeals to the mass market amid growing affluence in the region,” he said.

The aircraft was operated by AirAsia Indonesia, a unit of Malaysia’s AirAsia which dominates Southeast Asia’s booming low-cost airline market.

AirAsia, which has never suffered a fatal accident, said the missing jet last underwent maintenance on November 16.

The plane’s disappearance comes at the end of a disastrous year for Malaysian aviation while stirring old debates over safety and is especially onerous for discount airlines such as AirAsia.

Malaysia Airlines Flight MH370 disappeared while flying from Kuala Lumpur to Beijing in March with 239 passengers and crew, and in July flight MH17 was shot down over troubled Ukraine killing all 298 on board.

Flag carrier Malaysia Airlines fell only 4.0 percent the Monday after MH370 disappeared.

AllianceDBS downgraded AirAsia from buy to hold, saying the company’s debt burden will be heavier next year as the US dollar gets stronger.

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