AirAsia shares rise over 5% after earnings announcement

KUALA LUMPUR (Reuters) - Shares of AirAsia rose as much as 5.2 percent on Wednesday on anticipation of improving yields as well as better prospects for a potential share buyback programme by Asia's biggest budget airline by passenger numbers.

The group on Tuesday reported first-quarter profit rose 33 per cent due to improved passenger numbers, foreign exchange gains and deferred taxes.

Group Chief Operating Officer Tony Fernandes said that AirAsia will defer deliveries of a number of its aircraft that will result in a net gain of about 550 million ringgit (S$214 million), as the carrier looks to ease concerns of overcapacity.

"This would raise a larger-than-expected amount of cash, which could be used for their share buyback programme, and at least provide support to their share prices," said AllianceDBS Research analyst Tan Kee Hoong.

AirAsia's ancillary income per passenger - income other than from ticket sales such as luggage fees and food - rose 7 per cent, while yields advanced 1.4 per cent on quarter.

"You can roughly see the yield compression for AirAsia has largely bottomed out," added Tan. "With the removal of the yield concerns, second-half earnings will definitely be better than the first half. I think the market is speeding up the stock based on these reasons."

AirAsia shares were 3.4 per cent higher at 2.41 ringgit (S$0.94) as of midday after climbing to 2.45 ringgit, outperforming the Malaysian benchmark stock index that fell 0.17 per cent.