Facebook Twitter Google Plus Vimeo Youtube Feed Feedburner

Business Home LBoard

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


Readers are required to have a valid Facebook account to comment on this story. We welcome your opinions to allow a healthy debate. We want our readers to be responsible while commenting and to consider how their views could be received by others. Please be polite and do not use swear words or crude or sexual language or defamatory words. FMT also holds the right to remove comments that violate the letter or spirit of the general commenting rules.

The views expressed in the contents are those of our users and do not necessarily reflect the views of FMT.