Thursday, May 29, 2008

Now Everyone Can Buy AirAsia? Q1 '08 Review

Is AirAsia financial results matter? When I overlapped a crude oil ETF which tracks the price of crude oil with AirAsia, the conclusion seems to be very simple: Oil Up, AirAsia down. Translation, financial results do not matter, sentiments matter.

Shall I end here? Obviously not. In case you still care about its financial results, here are a few charts that can tell a story.

(i) AirAsia is for really long-term investor that can ignore bumps, it's very very volatiles.

(ii) In case you are skeptical of AirAsia can cut costs, have faith in them. Look at the way they cut down fuel cost.

(iii) In case you are still worried about the scenario of fuel costs will double, its fuel cost is about 50% of revenue in Q1 '08. Fuel cost was US $ 110 in Q1 '08, if jet fuel was to double to US $ 220, it will have 50% impact on their bottom line, assuming they don't raise fares. To maintain margin they may need to raise price by 50%. In my yesterday post was based on the assumption that they raised 40% air fare, will you still travel AirAsia? Have you gone to LCCT to find out the answer?

From Bursa Malaysia filling: Commentary on prospects

The airline industry is presently facing one of the toughest challenges, with record jet fuel prices, tightening of the credit market and a slower world economic growth. A consumer slowdown is not necessarily a bad thing because low cost carriers traditionally benefit from a consumer slowdown. Passengers who would normally take a full service carrier are likely to trade down and fly with a low cost carrier.
We are driving this consolidation process as we continue to offer irresistible fares, stimulate new markets, encourage price sensitive customers and expand to new destinations. No one is certain how long this situation will persist, but it is inevitable that weaker competitors will have to reduce capacity and disappear eventually. In this period of uncertainty, there is only one assurance – and that is low cost airline will prosper. In the end, AirAsia will emerge even stronger reflecting our brand, our sound business model, our unmatched cost advantage, efficient fleet, strength of our route network and our hardworking people.

Since this is for a very long term investment. Next update will be 2/1/2010. Turtle, Turtle, why are you keep sticking out your neck for so many unloved stocks? Don't you have any other better things to do?


OC said...

Hi, I hv added you in my blog link, can you add me in yr blog too? Tq

Bursa-KLSE Blogs And News

AC said...

oc, turtle don't simply link to any blogs.

anyway, i think the risk for Air asia is high, above the air.