Higher Interest Rates Won’t Stop Malaysian-based budget Malindo’s Rapid Growth?

September 26, 2013 Leave a comment

Higher Interest Rates Won’t Stop Malindo’s Rapid Growth

By Eko Adityo Nugroho on 3:53 pm September 25, 2013.
Malindo Air aims acquire 100 aircraft in the next decade and to start offering some international flights exceeding five hours. (Reuters Photo)

Kuala Lumpur. The Malaysian-based budget carrier Malindo Air plans to spend $800 million in 2014 in order to expand its fleet with 10 new planes. Edward Sirait, Lion Air’s general director, said Malindo — a joint venture between Lion Mentari Airlines, the company behind Indonesia’s largest budget carrier Lion Air and Malaysia’s National Aerospace and Defense Industries — will expand to India and China next year with the additional planes.“The funding will depend on the company’s financial condition and overall economy situation. If interest rates were low, we would purchase the planes. If not, we’ll get them from lease,” Edward said in Kuala Lumpur on Monday.

Chandran Rama Muthy, Malindo chief executive officer, said Malindo plans to open five new routes in India next year.

“That way, we can open direct flights from Indonesia to India,” Muthy told reporters on Monday.

Cargo shipments between the countries are also a possibility because there is the potential for textiles and coffee delivery.

Malindo will expand five more routes in China in the second half next year, including from Guangzhou and Shenzen.

“We see a great potential there with a passenger market of up to 1 billion people,” Muthy said.

The airline is targeting 2 million passengers next year — up 33 percent from its current target this year, Muthy said.

Malindo carried more than 600,000 passengers in the first eight months this year and the airline is left with four months to achieve its goal.

“We are confident that we will achieve this year’s target as a new route between Kuala Lumpur and Denpasar is set to open and a new airplane is to arrive soon,” he said.

Malindo’s new route between Kuala Lumpur and Jakarta opened on Monday and flights between Kuala Lumpur and Denpasar, Bali, will begin on Thursday, serving passengers seven days a week.

Malindo Air is serving 10 domestic destinations in Malaysia consisting of six in the Malaysian peninsula and four in Sabah-Sarawak, Borneo. The airline currently serves four overseas destinations, including Bangladesh and Indonesia.

Malindo is expecting an additional plane by the end of this year, bringing the total fleet to seven Boeing 737-900 ERs and three ATR 72-300s, Muthy said.

Lion Air has a 49 percent stake in the company, which launched its first route in March between Kuala Lumpur and Kota Kinabalu, the capital of the east Malaysian state of Sabah.

For its first year, the airline will rely on 12 of these short- to medium-range, twin-engine jets provided by Lion Air.

Muthy said Malindo aims to have 100 aircraft in the next decade, and to expand their offerings from Kuala Lumpur to include many more routes, including some flights that exceed five hours.

Lion Air signed record deals of $22.4 billion for 230 Boeing 737 airliners and $24 billion for 234 Airbuses.

Last month Lion Air president director Rusdi Kirana also announced the establishment of subsidiary Thai Lion, which will start flying to Thailand by the end of this year.

Filed under Macro Trends

Unknown's avatarAbout bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a comment