(Bloomberg) — AirAsia Bhd. shares headed for the biggest tumble in three years after the Malaysian budget carrier’s flight QZ8501 disappeared en route from Indonesia to Singapore.
The stock slid as much as 13 percent to 2.56 ringgit and was 8.2 percent lower at 11:31 a.m. local time. Shares were cut to a trading sell from buy at Hong Leong Investment Bank Bhd., which lowered its price target to 2.64 ringgit from 3.15 ringgit. AirAsia X Bhd., the long-haul arm of AirAsia, fell 6.6 percent. The FTSE Bursa Malaysia KLCI Index was little changed.
Search teams from Indonesia and three other nations are hunting for the Airbus Group NV A320 single-aisle plane that went missing yesterday off the coast of Borneo with 155 passengers and seven crew on board. The disappearance evoked fresh memories of the unresolved disappearance of Malaysian Airline System Bhd.’s Flight 370 in March.
“The AirAsia incident is worrying,” Alan Richardson, an investment manager at Samsung Asset Management Co. in Hong Kong, said by phone. “Investor sentiment toward Malaysian aviation has been hurt by the unfortunate incidents” in a short span of time, he said.
Longest Search
Malaysian Airline’s Flight 370 vanished from radar screens en route to Beijing from Kuala Lumpur on March 8 in what authorities called a deliberate act. No debris has been found in what’s become the world’s longest search for a missing passenger jet. The stock fell as much as 18 percent to a record low in its first day of trading after the flight went missing.
AirAsia shares had climbed 34 percent in the 12 months through Dec. 26 and the stock’s relative strength index rose to 74, above the 70 level that signals declines may be imminent to some investors. As of last week, 24 analysts recommended buying AirAsia shares, three said hold and one advised selling, giving the company a score of 4.61 out of a maximum 5 on a Bloomberg scale.
The company’s net income fell 85 percent to 5.4 million ringgit ($1.5 million) in the third quarter, dragged down by foreign-exchange losses. Annual earnings are projected to increase 38 percent for 2014 and 69 percent next year, analyst estimates compiled by Bloomberg show.
AirAsia QZ8501 was flying at 32,000 feet when the pilots requested to go higher to avoid clouds, Indonesia’s acting Air Transport Director Djoko Murjatmodjo said in Jakarta.
Buy Recommendation
There were storms along AirAsia’s flight path, Accuweather.com said on its website, citing its meteorologist Dave Samuhel. Storms are very active this time of year, Samuhel was quoted as saying, with December and January the wettest period of the year in Indonesia.
Investors should accumulate AirAsia shares amid the stock’s weakness as Indonesian demand shouldn’t be too “adversely affected,” analysts Raymond Yap and Gan Jian Bo at CIMB Group Holdings Bhd. wrote in report dated today.
AirAsia, the region’s biggest budget airline, had no fatal crashes in its history of more than a decade of operations, according to AviationSafetyNetwork, which tracks accident data.
The carrier’s Indonesian affiliate is one of only five airlines in the country allowed to fly into European Union nations. More than 60 others are banned by the EU from flying for safety reasons. While AirAsia is based in Sepang, Malaysia, it operates with subsidiaries and affiliates in different nations and the missing plane belonged to its Indonesian operations.
Of the 155 passengers, 138 were adults, 16 children and one an infant. The plane was carrying one Singaporean, a Malaysian, a person from France, one from the U.K., three from South Korea and 155 Indonesians, according to AirAsia. – BLOOMBERG
From Agence France-Presse
Shares in AirAsia, Southeast Asia’s biggest budget airline, lost almost eight percent on Monday in Kuala Lumpur after one of its jets disappeared with 162 people on board.
The firm slumped 12 percent to 2.60 ringgit at the open but recovered slightly to sit at 2.71 ringgit, still down 7.82 percent, by 0315 GMT.
The Airbus jet disappeared en route from Surabaya in Indonesia’s east Java to Singapore after the crew requested a change of flight plan due to stormy weather. Indonesia’s National Search and Rescue Agency said it is likely at the bottom of the sea.
However, Shukor Yusof, founder of aviation research firm Endau Analystics told AFP investors and creditors will remain firmly behind AirAsia and its CEO Tony Fernandes, who transformed a floundering carrier into Asia’s most successful budget airline.
“The market reaction is quite natural. I am not surprised,” he told AFP, adding: “I think investors confidence will return quickly since the airline has a solid business model.”
Indonesia resumed a sea and aerial search at dawn Monday for the Airbus A320-200 plane that went missing in the Java Sea Sunday morning.
Five aircraft will be sent to search for the plane, including two C-130 military transport aircraft and a Boeing 737, Indonesian air force spokesman Hadi Cahyanto told AFP.
Economist Yeah Kim Leng, dean of Malaysia University of Science and Technology School of Business, said any impact on the share price will be short-lived since there was nothing to stop the growth of the aviation industry in Asia.
“This incident will not dampen air travel on AirAsia because it is a budget carrier which appeals to the mass market amid growing affluence in the region,” he said.
The aircraft was operated by AirAsia Indonesia, a unit of Malaysia’s AirAsia which dominates Southeast Asia’s booming low-cost airline market.
AirAsia, which has never suffered a fatal accident, said the missing jet last underwent maintenance on November 16.
The plane’s disappearance comes at the end of a disastrous year for Malaysian aviation.
Malaysia Airlines Flight MH370 disappeared while flying from Kuala Lumpur to Beijing in March with 239 passengers and crew, and in July flight MH17 was shot down over troubled Ukraine killing all 298 on board. – AFP
Plane probably “at bottom of sea” – Indonesia Search & Rescue chief
The AirAsia plane which went missing with 162 people on board en route for Singapore is likely at the bottom of the sea, Indonesia’s National Search and Rescue Agency chief said Monday.
“Based on the coordinates given to us and evaluation that the estimated crash position is in the sea, the hypothesis is the plane is at the bottom of the sea,” Bambang Soelistyo told a press conference.
“That’s the preliminary suspicion and it can develop based on the evaluation of the result of our search.”
Soelistyo said Indonesia did not have “the tools”, such as submersible vehicles, required to retrieve the plane from the seabed, but that it is reaching out to other countries for help if necessary.
“Due to the lack of technology that we have, I have coordinated with our foreign minister so we will borrow from other countries which have offered. They are the UK, France and US,” he said.
The Airbus A320-200 disappeared Sunday en route from Surabaya in Indonesia’s east Java to Singapore after the crew requested a change of flight plan due to stormy weather, in the third crisis for a Malaysian carrier this year.
Singapore, Malaysia and Australia have dispatched aircraft and ships to assist Indonesia in the search, which is centred on the Java Sea. The US has also said it was ready to assist.
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