AirAsia flight QZ8501: Indonesia to review operations of Indonesia AirAsia, says minister

Authorities monitoring progress in the search for AirAsia Flight QZ8501 in the Mission Control Center inside the National Search and Rescue Agency in Jakarta on Dec 29, 2014. -- PHOTO: REUTERS
Authorities monitoring progress in the search for AirAsia Flight QZ8501 in the Mission Control Center inside the National Search and Rescue Agency in Jakarta on Dec 29, 2014. -- PHOTO: REUTERS

JAKARTA (Reuters) – Indonesia will review the operations of Indonesia AirAsia, the local unit of Malaysia’s AirAsia, after one of its jets carrying 162 people went missing on Sunday, presumed crashed in the Java Sea.

“We will review AirAsia Indonesia to make sure its performance can be better in the future,” Indonesian Transportation Minister Ignasius Jonan told reporters on Monday. “Much will be reviewed in terms of its business operations and in terms of air transportation business, so that there are safety improvements.”

Shares in parent budget airline AirAsia fell more than 7.8 per cent on Monday to RM2.71, the biggest one-day drop in more than three years.

Analysts said the Sunday incident involving AirAsia’s Indonesia unit may cause some travellers to be wary about flying with the AirAsia group, affecting its prospects to improve yields and bolster its profit in the year ahead.

“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,” said Mr Daniel Wong, an analyst at Kuala Lumpur-based Hong Leong Investment Bank.The research house downgraded AirAsia from a “buy” to a“trading sell” on Monday morning.The Kuala Lumpur-traded shares of AirAsia had fallen 7.8 per cent as of 3.20am GMT, their biggest daily drop since Sept 22, 2011. The stock had dropped as much as 12.9 per cent after the opening, compared with a 0.4 per cent decline in Kuala Lumpur’s benchmark index.Despite the decline, the stock has gained more than 20 per cent since the beginning of the year, compared with the index’s 5 per cent fall.About 59.5 million AirAsia shares had been traded, making it the bourse’s most active stock. That was about 5.2 times the stock’s average full-day volume over the past 30 days.The Bangkok-listed shares of Asia Aviation, the holding company for Thai AirAsia in which the AirAsia group holds a 45 percent stake, fell 3.6 per cent on Monday.Indonesia AirAsia is 49 per cent owned by Malaysia-based budget carrier AirAsia, with local investors holding the rest. The AirAsia group, including affiliates in Thailand, the Philippines and India, has not had a crash since its Malaysian operations began in 2002.Indonesia resumed its search for the missing jetliner QZ8501 at first light on Monday.Mr Hafriz Hezry, an analyst with AmResearch, expected the stock to recover within a few days after the market’s initial reaction to news of the missing airplane.AirAsia’s reputation at the group level may take a hit, affecting its yield recovery next year, he said, but the impact on AirAsia’s earnings would be minimal because its share of the Indonesia unit’s profit will not be included in its earnings until the unit has reversed unrecognised losses, which could take several quarters.