Exec chairman: AirAsia still an aggressive animal, more promotions coming

November 8, 2013 Leave a comment

Updated: Friday November 8, 2013 MYT 8:53:03 AM

Exec chairman: AirAsia still an aggressive animal, more promotions coming

BY LEONG HUNG YEE

KUALA LUMPUR: Newly-appointed executive chairman of AirAsia Bhd Datuk Kamarudin Meranun said competition is forcing his airline to “hit back aggressively”. “We may have been complacent in recent months and our yield had been slightly affected but AirAsia has always been an aggressive animal. “We are coming back with more promotions, cost reductions and new ancillary income streams,” Kamarudin said in an interview a day after he replaced Datuk Aziz Bakar as executive chairman of AirAsia.Kamarudin alluded to have under-estimated the competition but stopped short of any naming.

It is understood though that it is new entrant Malindo Air which has been largely responsible for this new level of competition into the industry.

In the second quarter of financial year 2013, the yields of the airlines dipped.

According to analysts, incumbent MAS suffered a 10.6% drop in its yield in the first half of this year due to intensifying domestic competition with the emergence of Malindo and other new foreign carriers. AirAsia’s yield also declined by 2.7% during that period.

“We had taken that (the competition) for granted,” Kamarudin concedes but added that the lower yield suffered by AirAsia in its second quarter “was manageable”.

Kamarudin declined to elaborate its new ancillary income but industry sources said AirAsia had constantly introduced new activities that enabled the airline to achieve higher ancillary income.

In a recent tweet, group chief executive officer Tan Sri Tony Fernandes said: “AirAsia 2014 ancillary income machine is going to be big.”

Kamarudin also gave some quick updates on the progress of AirAsia. For example, he said AirAsia hoped to maintain its dividend payout, including the special dividends it had paid.

AirAsia has a dividend policy to pay an annual dividend of up to 20% of annual net operating profit to shareholders.

In the previous financial year ended Dec 31, 2012, AirAsia declared a special dividend of 18 sen, on top of a final dividend of 6 sen, which brings the full-year dividend per share (DPS) to 24 sen.

This translates to a DPS yield of 9.09% at yesterday’s closing of RM2.64.

“We think our shareholders should be happy with our capital appreciation and dividend payouts,” quipped Kamarudin.

On the company’s capital expenditure requirements, he did not specify the amount earmarked, only saying, “it will depend on how hungry we are at any point in time”. He added that there wasn’t any need for AirAsia to raise fresh funds at the moment.

Interestingly, he noted that AirAsia always has the option of selling its stake in other units of the group such as Tune Ins Holdings Bhd. AirAsia owns 16.19% in the listed Tune Ins.

Kamarudin was one of the founding members of AirAsia along with Fernandes. He has been a board member prior to last Wednesday’s announcement of making him executive chairman, replacing Aziz, who remains a board member.

The moves indicate that there will be three key people helming AirAsia with different roles: Fernandes to spearhead regional growth; Aireen Omar as chief executive officer, managing operational, regulatory and stakeholder management issues; and Kamarudin to take the lead in engaging with the Government, aviation regulators and airport authorities in Malaysia.

One of AirAsia’s long-standing issues in Malaysia had been concerns related to the delay and cost of the construction of KLIA2. AirAsia is expected to announce its third-quarter financial results in two weeks.

On Nov 3, Fernandes tweeted: “Just finalised 3rd quarter numbers. Very pleased. 4th quarter looks very very strong. Costs down as well. 2014 going to be a big year.”

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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.

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