ASEAN KEY DESTINATIONS
Long haul low-cost carrier IPO postponed
Route expansion is a vital component for AAX and key to its sustainability. Without government approvals for new routes, its growth will be hampered. It needs both primary and secondary routes and this is what potential shareholders will scrutinise if they were to invest in this airline which is planning an initial public offering (IPO).
AAX will be the first long haul low-cost carrier to be listed on a stock exchange but the IPO has been postponed to next year. Originally the plan was to list in the second half of this year. This airline has access to key Asia-Pacific markets, Europe and eventually Middle East and the United States.
Soaring crude oil prices that has pushed jet fuel prices to US$140 a barrel is a factor to the delay and hence its route expansion.
“To have a successful IPO you need to show the prospective shareholders that your financial results are very promising. It is no secret that soaring fuel prices are crippling profits margins and that remain a challenge.
“AAX also needs to let its operations mature to show good results so that it would lead to a better story telling,'' said an analyst with Maybank Investment Bank.
Analysts are also predicting a turbulent year for airlines this year due to soaring jet fuel prices and they see a u-turn in prices in the near to medium term.
Passenger numbers may be strong but the imposition of higher fuel surcharges and fares to combat rising cost will cause travellers to delay travel plans.
The International Air Transport Association (which has 230 airlines as its members) released data showing a 2 percent traffic loss by Asia-Pacific carriers in March compared with February. This led to a sharp 2.3 percent fall in load factor to 74.2 percent.
So, delaying the IPO may be apt, said an analyst.
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