AIR ASIA Share price depand on oil price.......

tat show mgmt is not prudent with financial management. will result in loss of confidence in mgmt which have very very high weightage on the price la

let bet....big or small..(oil price up or oil price down)...hehe..this is not investment, this is gambling....better go to Genting !!!

Yes, running a business, the primary issue is to have a smooth and steady profitibility of the business, you don't speculate whether your raw materials price will go down or up. If it goes up, you pass on the cost as much as possible to your customers/consumers (I think for airliners they can through fuel surcharge, just my guess), if goes down, it is the same, either you earn more or pass the benefit to the consumers. Basically, the most important criteria is to have a steady profit margin
This kind of news will weight on the shares price for awhile unless oil price turns down significantly.

Technically, the 1.60 level immediate support line is breached, so next long term suppor would be at around 1.3x-1.40.

I believe Tony Fernandes once said he would never raised the fuel surcharge for his tickets, meaning to back up his word, he needs to somehow mitigate the fuel costs which is not passed to the customer.

For immediate release
15 JANUARY 2008

AIRASIA CLARIFIES FUEL HEDGING POSITION

Kuala Lumpur, 15 January 2008 - AirAsia wishes to rectify certain statements appearing in the press and analyst reports with regards to the Company's fuel hedging strategy.

It has been stated by the press and in some analyst reports that the Company adopts a fuel hedging strategy that is speculative. The Company wishes to notify that it has never speculated on fuel prices in the past and will not speculate on fuel prices going forward. Our strategy has always been to hedge fuel requirements whenever an attractively priced structure is available. Fuel hedging is an important component of our strategy as it provides us with clarity over our cost structure; this will allow us to manage our seat inventory better and aids route development. We are averse to risks and therefore believe in mitigating those risks by removing variability and uncertainties from our business whenever suitable opportunities arise.

Prior to a trade being executed, one would have assessed the current operating and market conditions before choosing the appropriate hedge. Therefore, the decision to hedge begins with a view. At the time the earlier hedge was taken in July 2007, our view was that oil prices of above USD90/barrel will be a result of excessive speculative market action in that commodity.

Fuel price volatility intensified in the later part of the second half of 2007 due to higher fuel consumption projections, supply disruptions, geopolitical risk concerns, and the weakening of the US Dollar. Due to the high volatility in oil prices, we are of the view that adopting a static hedged approach (through fixed/plain vanilla swaps) at current price levels would involve taking excessive risks. If one were to opt for a fixed swap now and should fuel prices retrace subsequently, we would be left with effectively an obligation to purchase expensive fuel with no room to manoeuvre out of the position. Therefore, we opted for a dynamic approach and layered fuel hedge structures. We are confident that this is the most suitable approach to manage the high volatile fuel prices and will continue to apply this strategy in the future.

We approach this fuel hedging subject carefully and we have always maintained a conservative stance which has resulted in positive contributions from our past fuel hedges. This has ultimately benefited the Company in reducing the total fuel bill and hence enhance our ability to offer low fares to our guests.
Over the past two months, foreign funds have been reducing their exposure in airline stocks. As depicted in the table below, all the prominent low cost carriers around the world experienced heavy sell downs. Therefore it would be inappropriate to lay the blame on our fuel hedges as the reason for the decline in the Company's share price.

Airline Name Price on 3rd December 2007 Price on 11th January 2008 Share Price Change
AirAsia MYR 1.88 MYR 1.58 -16%
Ryanair GBP 4.74 GBP 3.88 -18%
EasyJet GBP 5.57 GBP 4.60 -17%
SouthWest Airlines USD 13.74 USD 11.70 -15%
JetBlue Airways USD 6.93 USD 4.74 -32%
Virgin Blue AUD 2.23 AUD 1.78 -20%
GOL Airways BRL 46.60 BRL 36.79 -21%
Source: Reuters

"We believe that the recent sell down of AirAsia shares are overdone. The Company's fundamentals are in the best position ever, market demand continues to be robust and we will be launching lucrative routes such as Kuala Lumpur to Singapore and Kuala Lumpur to Guangzhou. With this fuel hedge in place, and assuming that the strong demand and pick-up rate that we are seeing is sustainable, the Company is in a sound position to deliver strong profit growth for the financial year - barring any unforeseen events and circumstances."
- Dato' Tony Fernandes, Group CEO, AirAsia Berhad -

Looks like they realize that they are heading even more southwards, and have released this latest news release. Hmm..wonder if it would fare well for AirAsia's stock price..is it coming out of the grave?

The article the warbamboo posted is a good example of how Malaysian companies shouldnt leave it to the last min to make statements about a certain controversy. AirAsia has made comments about it fuel hedging policy but all of them were very vague. How can that boost investor confidence? Today Tony said in an interview with Bloomberg that they have purchased fresh options to cover earlier losses on the old options. So even if oil goes to US$130 he says AirAsia is safe. But at current prices could be an attractive buy for a longer term holding. So watch the stock.

Read Article on KLSE Stock Review: AirAsia's Stock Price Goes The Opposite Direction Of Their Planes

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Added on January 18, 2008, 3:35 pmKLSE Stock Review

The EPF just purchased a huge 5.2% stake in AirAsia on 16 Jan 2007. I think AirAsia stock price is around rock bottom. Good time to collect it for long term holding.



This post has been edited by klsestockreview: Jan 18 2008, 03:35 PM

i think i can go to rm2 bucks

maybe not until the market stops seeing red..hopefully its not too long though.

Looks like AirAsia's fall has already stop so far and steadied at RM1.50. Looks like a stable position here, even EPF already started buying some more shares.

i also a bit confused...

if AA didnt play hedging...said when oil drops to USD50..i will buy AA since this one of the big component of direct cost...but due to this hedging..im not knw whether this AA will benefit from it somemore..they can put so many contract make us so confuse....

This post has been edited by ts1: Jan 22 2008, 11:25 AM

how to know what stocks that those big fundmanagers buying? eg: epf

I got that under their news item, whenever substantial share holders change holdings, it will be posted as a announcement.

If one does hedge (it depends how much you hedge against, can be 100% can be 50% or 10%), then the movement in the crude price up or down doesn't affect you. You basically lock in the price already. So if AA does hedge and crude price come down significant, AA won't enjoy the lower price, whilst if price goes up, it is the other way.

But it is seldom for airliners to hedge fully, as fuel price cost can be always pass on to the consumers front through fuel sur-charge.

it act depends on them wanna release it sooner or later... coz i saw some annuncement of changes of shareholder was announce few weeks or months back....

Fundamentally, AA is strong and the gross profit and net profit are very healthy relative to the size of this company. So, I go for a BUY to this counter no matter what price it is. Given the circumstance of recent news about AA's fuel hedging activity, people (I am pointing to the speculators) tend to be pessimistic and try to sell off the counter. Well, real investor won't just sell the share because of a single event the happen to a company as strong as AA. Therefore, don't worry about some cyclical speculative move of a counter as strong (brand name, profits, strategy, outlook) as AA. Now the price is hovering in the region of RM1.50, that is a good price.

from d way u talk... seems like u already own this company

maybe its out of da topic...but whr can i find loads of info abt airasia..as in the company profile besides da aa website or wikepedia?
history, growth..anything n everyting abt da company...
thx

Fundamentally AA is strong, no doubt about it, but the recently news of 'playing or selling its fuel hedging' (it sell its hedging position and left company fuel price totally without hedge)' is dissapointing the real investors on the company.
As a company needs to do is focus and develop their businesses, not concentrate on the hedging and derivatives market. Hedging and derivatives product are meant for protection for its fuel cost, not for the company to make profit out of it or trade with it. That's why its shares plunged after this news come out.
But after clarify and buying new hedging on the fuel, it would take sometimes to restore some investors confidence on it.

Real investors will sell any stocks if there is some mis-management or earning issue on the company side and will keep track on company performance. Real investors do care the health of company being run so can't totally say real investors won't sell share because a single even happened. That's no a small event, it will affect the company finance situation if not manage properly.

Basically what AA can do is delivering good sterling performance of coming quarterly result then confidence will be restored and share price will go back up. As what matter most is the company earning result and health of financial situation.
Not meant to disagree, infact, at 1.50 might be a bargain buy.

Just my 2 cents.

This post has been edited by cherroy: Jan 31 2008, 08:56 AM

seems like lower trendline does hold on vry good..




now let see how good is this counter to break downtrend, if it unable to break, get ready for slow bungeee jump

edited: typo

This post has been edited by low yat 82: Feb 3 2008, 11:13 PM