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AirAsia’s long term plans will not suffer due to missing plane, say aviation experts

AirAsia is facing challenges in the South East Asia region but the disappearance of its Airbus A320 aircraft on Sunday will not significantly impact its long term growth, say aviation analysts.

Their optimism is based on two factors – AirAsia’s safety record (it has not suffered a crash till now) and the strong demand for budget travel in the region.

AirAsia runs airlines in Malaysia, Thailand, Indonesia, Philippines and now in India.

The last few months and the year have not been encouraging for the airline. Its consolidated profit ($ 110 million) in 2013 was the lowest since 2009. Profitability was impacted due to intense competition in Malaysia, a slump in demand because of political crisis in Thailand and the impact of currency depreciation.

Although the disappearance of the jet will impact the airline in short term, its long term growth and expansion will not be hit, feel experts.

“In my view  the loss of Airbus A320 aircraft is unlikely to have a significant impact on AirAsia’s growth and expansion plans in Southeast Asia and beyond. This is because the airline has had a very good safety record since its inception in late 2001 and that this latest incident appears to be weather-related. While there has been immense pressure on AirAsia and its long-haul subsidiary, AirAsia X, the company remains strong fundamentally as a result of the continuous demand for budget travel in Asia,” said Malaysia based analyst Shukor Yosuf. 

He, however, feels the incident will have a bearing on the earnings of the company in the near term.

Daniel Tsang of Aspire Aviation said, “It would be hard to imagine AirAsia’s ambitious growth being derailed by a single accident.”

“While it is true that Asia-Pacific is plagued by overcapacity and AirAsia has postponed 19 A320 aircraft deliveries, but it is a matter of time before demand catches up. Given Indonesia’s huge growth potential, Indonesia AirAsia would be wrong to slow its growth,” Tsang said.

“I do not believe Sunday’s incident is the result of a systemic problem at AirAsia or for that matter in the region. The high growth rates continue to put pressure on regulatory oversight and in filling key positions. But as we have seen in recent upgrades of local civil aviation authorities in the Philippines and Indonesia, it is  moving in the right direction,” remarked aviation consultant and former regional sales head of Bombardier Torbjorn Karlsson.

Karlsson, however, feels the incident will put AirAsia under scrutiny and could impact planned growth.


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