Hi Guys/Gals,

These are the reasons why Airasia is Flying into A Coming Storm

1) The Rise of Trump will impact on Airasia's high debt.

See QR (airasia report)

20. Capital commitments outstanding not provided for in the interim financial report Capital commitments for property, plant and equipment:

Group and Company

30/6/2016   Approved and contracted for 79,869,827,000 

Airasia has a contract of RM79 BILLIONS In Commited contracts. These are for planes already delivered & also for those planes booked and yet to be delivered.

This is a horrendous amount of real commited debt.

2) According to Airasia there are 170  planes now Flying

Press Release airasia.com

AIRASIA PLACES ORDER FOR 100 A321neo AirAsia has on 12th July 2016 placed an order with Airbus SAS for 100 A321neo aircraft as announced at the Farnborough Airshow yesterday by AirAsia Group Chief Executive Officer Tony Fernandes and Airbus President and CEO Fabrice Brégier.

This marks the first order placed by AirAsia for the largest model in the best-selling A320 Family. Seating up to 236 passengers in a single class layout, the A321neo will enable the airline to increase capacity while benefitting from the lowest operating costs in the single aisle category. Today’s announcement sees the total number of A320 Family ordered by AirAsia rise to 575, reaffirming the carrier’s position as the largest airline customer for the Airbus single aisle product line. To date, over 170 A320s have already been delivered to the airline and are flying with its units in Malaysia, Thailand, India, Indonesia and the Philippines

. Tony Fernandes, AirAsia Group Chief Executive Officer said, “AirAsia Group currently operates close to 1,000 flights per day to more than 120 destinations in 24 countries. We recorded a robust load factor of 85% in the first quarter of 2016, up 8 percentage points from the same period last year, and we are confident of maintaining this momentum going forward.

The A321neo will help us to meet ongoing strong demand as well as further reduce our cost per Available Seat Kilometre across the group, which will translate to lower air fares for our guests. We would like to congratulate Airbus for producing the state-of-the-art A321neo aircraft that meets our requirements for efficient operations.”

Fernandes added, “The A321neo will be operated on our most popular routes and especially at airports with infrastructure constraints. It will allow us to bring higher passenger volumes with the same slots, therefore providing immediate benefits to the airports. These include, among others, more efficient operations, higher revenues from passenger service charges, and more airport retail purchases. We will also continue to maintain our 25-minute turnaround with two- or three-step boarding where permitted to ensure on-time performance.”

“We are extremely pleased to receive this additional order from AirAsia,” said Fabrice Brégier, President & CEO, Airbus. “This is another strong endorsement for the largest member of our single aisle family, which is now the clear market leader in the 200 plus seat category. We look forward to see A321neo flying in AirAsia colours and contributing to the airline’s continued success as one of the world’s leading low cost carriers.”

Notice the words: 170 A320s

These are plabes which have been delivered and are now flying in Malaysia, Thailand, India, Indonesia & the Philippines

Note further: On 12th July 2016 there is an order for 100 A321neo planes.

What is the cost of these planes? 

AIRBUS AIRCRAFT 2016 

AVERAGE LIST PRICES (millions of US$)

A318 ......... 75.1

A319............ 89.6

A320............ 98.0

A321........................ 114.9

A319neo...... 98.5

A320neo............. 107.3

A321neo........................... 125.7

A330-200 .............................................231.5

A330-800neo............................................................... 252.3

A330-200. Freighter................................... 234.7

A330-300.............................................................................. 256.4

A330-900neo......................................................................................................... 287.7

A350-800.............................................................................................. 272.4

A350-900 ..................................................................................................................................308.1

A350-1000.................................................................................................................................................... 355.7

A380-800........................................................................................................................................................................................ 432.6 P

From here we cab get an estimated cost of planes owned by Airasia.

As of now US1 = Rm4.41

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This is off shore rate. Remember the planes are bought from the USA

How much is a A320?

USD 98 millions. Converted to ringgit = 98,000,000 x 4.41 = Rm432.18 millions per plane.

Now how much is 170 A320 planes?

So 432,180,000 x 170 =  WOW!  Rm73.47 BILLIONS!

And 100 A321neo booked already.

How much per A321neo plane

USD125,700,000 x 4.41 =  Rm554.337 Millions (That's over half a billion ringgit per plane)

How much is 100 units 

So 554,337,000 x 100 = Rm55.43 BILLIONS

So what is the TOTAL COMMITED & DELIVERED AIRCRAFTS PLUS COMMITED & YET TO BE DELIVERED AIRCRAFTS?

73,47 Billion + 55.43 Billion =  WOW! RM128.9 BILLIONS (DEBT OF PURCHASE!)

Airasia is such a highly indebted Company. 

Is its Business Model good & sustainable longer term?

What are the risks?

No.1. High US Debt is detrimental if Ringgit crash like 1997. At that time it was the high debt & leverage that caused many insolvency which later led to bankruptcy. And those with US debt exposure are more vulnerable.

No. 2. SO HIGH CAPITAL FOR SMALL FARES TO COMPETE?

Imagine using Roll Royce limo as taxi?

A roll royce only cost a few millions while an Airbus A321neo cost over half a billion ringgit. 

How to use such expensive planes for such marginal profits. The Capital Commitments for such thin margin profit is justifiable?

No. 3.  THE HIGH DEPRECIATION COST NOT FACTORED IN

This is the most importion factor all experts & analysts have totally overlooked.

And this is the final Achielle's Heel of Airasia

As soon as a car leaves the showroom its value starts to depreciate. By how much per year for a car?

15% for a private car?

And 20% to 25% for a Company Car?

What if the car is used as a Taxi? An ambulance? It will depreciate even more.

Now according to QR of Airasia the debt is Rm73.47 BILLIONS

Ok, ok, Tony is clever to get a 10% discount. So 73.47 x .9 = Rm66.12 BILLIONS

So what should be the depreciation for Airasia used planes?

10%?

15%?

20%?

Remember Airasia planes are not used as private VIP Jets but it is used to its maximum capacity - sometimes flying with free seats.

Ok? So Calvin will be generous. Only 10% depreciation per year

So 66.12 x .1 = Rm6.6 Billion a year in depreciation.

Now see if Airasia's profit can cover its Rm6.6 billion depreciation a year. What about its debt. Future debt commited. Future depreciation of ringgit? Of course it has hedged against the US dollar. By how much & for how long?

As of now the view from the cockpit is blurry. No one knows how far and how long the rinngit will crash against the US dollars.

And with Trump slamming the door shut to free trade or unfair trade. How will it impact travelers. Can all continue to fly? What if they can't even afford to drive when their jobs are gone and cars repossessed?

I really hope things won't be that bad. Not another repeat of 1997 or 2008 please.

But Brexit was unexpected. And all thought Clinton will win.

So be careful now.

As Airasia price has surged upward EPF has been selling and selling into strength

Until EPF ceased to be a substantial shareholder of Airasia

See

Company Announcements

As the sky is cloudy better stay grounded safely on terra firma for now.

What is safe then?

OF COURSE THERE IS ONE

POS MALAYSIA

The POS OFFICE Has Been Around for 200 Years. So I think it should survive for at least another 100 years.

And JackMa's Alibaba has sales record all broken

See

Alibaba breaks records, sells $17.7 billion on Singles Day

• 
• C. Custer 12:05 AM at Nov 12, 2016
• • 3.2k
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