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AirAsia shares down after launch of rival airline

September 12, 2012

KUALA LUMPUR: Shares in AirAsia Bhd fell as much as 5 per cent in early trading on Wednesday, following the launch of the Malaysia-based rival budget airline, Malindo Airways.

Malindo, will start flying in May next year between Malaysia and Indonesia. Lion Air has a 49 per cent stake in the airline, a joint venture with Malaysia’s privately held National Aerospace & Defense Industries Sdn Bhd, which holds the majority 51 per cent.

“The immediate impact to AirAsia will be the contraction of its profit margin due to a potential price war,” said Kenanga Research in a note on Wednesday.

It added that AirAsia is likely to be able to make up for any price cuts through other income streams and the wide connectivity within the AirAsia Group.

“We are neutral on this news as we do not see Malindo as a threat for AirAsia in the near term,” it added.

AirAsia Chief Executive Tony Fernandes downplayed the potential competition from Malindo Airways in local news reports.

At 0928 a.m., AirAsia was down 4.7 per cent at 3.04 ringgit, after touching a low of 3.03 ringgit, while the benchmark composite index was down 0.12 per cent at 1612.73.

- Reuters


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