AirAsia shares tumbled as markets opened in Malaysia on Monday, plunging by nearly 13% at the open and settling down 7.82%, after one of the company’s aircraft carrying 162 passengers went missing over Indonesia on Sunday.
However, some analysts this morning are saying that the missing jet is unlikely to seriously damage the company in the long-term. Here’s Morgan Stanley on the impact:
We think AirAsia’s longer-term growth trajectory should remain on track. Firstly, we find comfort in a strong management team which has also been swift in its response to the accident. In addition, assuming fuel prices remain lower for longer, we think that fuel-cost savings could offset near-term impact from lower passenger yields and weaker demand.
They’re staying overweight AirAsia shares, meaning that they still expect it to be a pretty good investment going forward. AirAsia CEO Tony Fernandes has overseen the company’s rapid expansion, beginning with two jets in 2002, and expanding to over 80 aircraft today, according to the Telegraph. Fernandes travelled to the airport that the plan initially departed from, and said that he is devastated by the news.
The analysts also said that lessons could be learned from Malaysia Airlines’ (MAS) experience: In March 2014, Malaysia Airlines lost contact with flight MH370. The plan was carrying hundreds of passengers and has still not been found:
Domestic air traffic demand in Malaysia could face a bigger impact compared to international traffic for Malaysia AirAsia.Lessons gleaned from MAS over the past year suggest that domestic demand in Malaysia has tended to be more sensitive towards air travel safety while international demand has tended to be more price sensitive. Considering that c.60-70% of AirAsia’s capacity is domestic focused, this incident may havea near term impact on operational profitability
Morgan Stanley’s projections estimate that earnings before tax will rise by about 40% from the 2013 fiscal year to 2016.
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