Upon full implementation of Asean open sky policy in 2015, MIDF Research expects a quantum leap in the growth of Indonesia, putting AirAsia Bhd in good stead should it execute the right
strategy.

It said the profit-making budget carrier, with its regional office in Jakarta, currently owns 58 aircraft to serve Malaysia's 30 million population, compared with 18 aircraft to serve 240 million people in Indonesia.

"We believe the move by its rivals, Tiger Airways to acquire Indonesia's Airline Mandala and Lion Air to purchase 201 new Boeing 737 aircraft, has compelled AirAsia to base its regional office in the country," MIDF said in a research note.

With fuel cost accounting almost 50 per cent of its operating cost, MIDF Research expected the softening of jet fuel price to improve the carrier's profitability in the coming quarters.

Jet kerosene price fell sharply by 15.8 per cent to US$112.31/b since last month.

"Our view is that crude oil price will remain depressed at current level for the remaining 2012 due to weakening economic outlook in the Eurozone.

"We expect the same for jet kerosene price as it moves in tandem with crude oil price," it added.

From July 1, Aireen Omar will take over as chief executive officer of the Malaysian operations while Group Chief Executive Officer Tan Sri Tony Fernandes will oversee growth and expansion of the Asean market.

Meanwhile, OSK Research said apart from AirAsia's regional growth plan and ahead of the listing of its Indonesian associate, it believed the management may in the immediate term focus on growing its Indonesian market given that air travel remains underpenetrated due to its large population.

Both research houses have maintained a "buy" call for AirAsia. AirAsia operates hubs in Malaysia, Indonesia, Thailand and the Philippines. Singapore is the only missing link as the budget carrier has yet to establish an entity in that country although it is already functioning as a hub to some degree given its significant market share at Changi Airport. -- Bernama