April 21, 2019
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AirAsia
Image from Wikimedia

AirAsia Bhd. (AIRA) shares fall after Malaysian budget carrier Flight QZ8501 – with 155 passengers and 7 crewmembers on board – disappeared and crashed en route from Indonesia to Singapore. Investors react to the disappearance right away, making company shares off by more than 10% in the opening minutes of trade in Malaysia.

The Missing Flight

The Airbus Group NV (AIR) A320 single-aisle plane went missing on December 28, 2014 off the coast of Borneo with 162 people (138 adults, 16 children, and an infant) on board. Most passengers were Indonesian, but there were also people from Singapore, Malaysia, France, South Korea, and the UK.

CEO Tony Fernandes informed the public about the crisis via social media saying, “This is my worse nightmare. My only thought(s) are with the (passengers) and my crew. We put our hope in the SAR operation and thank the Indonesia, Singapore and Malaysian governments.”

The low-cost airline says that it will do whatever it can to help. A search and rescue operation is underway in the Java Sea along the well-trafficked shipping routes.

A few days after welcoming New Year, reports say that coastguards have found what seems to be debris from a plane. Families of the passengers were devastated to find out that the plane crashed in shallow seas. Around March 2014, Malaysian Airline System Bhd. (MAS) Flight 370 also went missing and the case remains unsolved, bringing back the memories of the incident.

The Losing Stocks

“The AirAsia incident is worrying,” investment manager at Samsung Asset Management Co. (Hong Kong), Alan Richardson, said through a phone interview. “Investor sentiment toward Malaysian aviation has been hurt by the unfortunate incidents.”

AirAsia shares decline by 7.8% – their biggest one-day drop since Sept. 22, 2011. Analysts say that this is the result of travelers becoming cautious about flying with the airline group because of the Indonesia-Singapore incident. This has a significant effect on the company’s ability to improve yields and boost profit for the year 2015.

Daniel Wong, analyst at Hong Leong Investment Bank based in Kuala Lumpur, noted, “I was expecting yields to at least maintain on a year-on-year basis in 2015, but now I’m expecting them to decline by up to five percent.”

The stocks of AirAsia in Kuala Lumpur dropped further to 12.9%, compared with its 0.4% decline in the benchmark index. The Bangkok-listed shares of Asia Aviation, which is 45% part of the AirAsia group, also declined by 3.6%.

The AirAsia group – with affiliates in India, the Philippines, and Thailand – never had a crash since its Malaysian operations in 2002. Analyst at AmResearch, HafrizHezry, says that the stock will recover after a few days the when the market’s initial reaction to the airplane disappearance calms down.

Ink Well Mag

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