AirAsia to miss profit goal due to plane shortage

AirAsia to miss profit goal due to plane shortage

Khoo Hsu Chuang
Bloomberg/Kuala Lumpur

AirAsia Bhd., Southeast Asia's biggest discount airline, may miss
its profit target for the year ending June because it lacks the
aircraft needed to meet rising demand for low-fare air travel,
analysts said.

AirAsia may fall short of its 147.4 million ringgit (US$38.8
million) profit target by 25 million ringgit, or by 17 percent,
Credit Suisse First Boston's analyst Peter Hilton said in an
April 29 note to investors. Macquarie Securities Ltd.'s analyst
Paul Dewberry said AirAsia may miss its forecast by 3.4 percent.

"If they come short of target, it's purely because they don't
have enough planes," Hilton said on Friday in Hong Kong. "Rather
than enter into leases which run for several years" at
uncompetitive prices, "they've elected to slow down their growth
and await the delivery of their own cheaper aircraft," he said.

AirAsia, the largest low-fare airline in a region with 500
million people within three hours' flying time from its base
outside Kuala Lumpur, may not be able to meet Southeast Asia's
rising demand for air travel until December, when it takes
delivery of the first of 60 A320 aircraft it ordered from Airbus
SAS. The carrier is expanding its fleet and renewing its aircraft
to fly to China, Indonesia and Thailand.

AirAsia cannot get enough planes with the flight record that
meets its maintenance standard, Chief Executive Officer Tony
Fernandes said in an interview on Thursday in Kuala Lumpur. Both
Fernandes and the carrier's Chief Financial Officer Raja Mohd.
Azmi declined to say if the carrier would achieve its target for
the year ending June.

The airline will make a statement on the profit forecast on
May 25 when it reports its third-quarter earnings, he said.

The airline's earnings would be "in line with what's happening
in the world" with surging oil prices and earthquakes in
Indonesia that discouraged traveling, he added.

"We have stuck to our guns in not taking short-term decisions
for short-term gains, and we won't make mistakes to make our
profit numbers," he said. "From what we put in our budget, I
think we're happy with where we are."

AirAsia's shares were unchanged at 1.65 ringgit at the 12:30
p.m. trading pause in Kuala Lumpur. The stock has risen 42
percent since its Nov. 22 debut from the 1.16 ringgit offer price
to retail investors. Shares of Malaysian Airline Systems Bhd.,
the nation's largest carrier and an AirAsia competitor on
domestic routes, fell 12.2 percent in the same period.

Macquarie, JPMorgan Chase & Co. and Avenue Securities Sdn. in
Kuala Lumpur recommend investors buy AirAsia shares. Five
analysts of 11 surveyed call the stock a "hold" and three
recommend investors sell the stock, according to Bloomberg data.

AirAsia, which began flying in January 2001 with three Boeing
737-300 aircraft, said it's replacing all 24 planes made by the
Chicago-based company in its fleet with Airbus A320 models. Until
the A320 planes arrive, AirAsia is using Boeing 737-300s, under a
previous arrangement.

"We're refusing to take these (Boeing) planes which are coming
from all over the world, because their (flight) records are
appalling," Fernandes said. AirAsia won't want to use an aircraft
"unless we have the ability to trace how they're maintaining
their planes," he said.

AirAsia in March placed a $3.8 billion order for 60 Airbus
A320 planes, with options for another 40 aircraft. The A320,
which can fly up to 150 people for a maximum distance of 3,000
nautical miles, carry a list price of $63 million each.

Noor Azwa Mohd Noor, Avenue's head of research, said he is
"probably" going to cut the airline's full-year profit, after the
carrier's sales in the first six months fell below expectations.
He declined to give details.