Monday, January 14, 2008

Tony, fuel, going private talk

[with updates, after the story below]

AirAsia slips on oily patch.
Just a day after Tony Fernandes said (in NST's Outlook 2008 interview) that "the main challenges for (AirAsia) would be airports, not fuel", a major investment analyst released its Jan 9 report (excerpt below) warning investors of a RM100 million annual loss that AirAsia could be staring at as a result of its fuel hedging policy, which some concerned parties considered "excessively speculative".


p.s. Private talk. There's also speculation that Tony is taking AirAsia private. So soon after it was listed on the Bursa, and after all the excitement it has brought to the Malaysian aviation scene? That's what I thought, too.

UPDATES 14/1/08, after lunch:
1. Visit Ganesh,t he blogger Down Under, for "Tony Fernandes and AirAsia's nightmare".
2. This week's The Edge goes to town with the story, here.

23 comments:

Anonymous said...

When you have Khariy Jamaludin and Kalimuallah with you, worry not. ALl will be sorted out with a whisper to the Sleepy Head o rsomeone in the Fiance Minsitry will do some "magic show".

Airasia was a big joke from day one. Why must the government specilly built another ariport known as LCCT when we already has an under used KLIA. At most, if Airasia need another airport then the governmetn should just lease a piece of land to Airasia and let AIrasia build the LCCT with their own fund. But the the Sleepy Head government saw it fit to build the LCCT for Airasia.

Rocky, before Airasia goes under, please ask the Sleepy Head governmetn to demand Airasia and his friends to pay back the subsidy given to FAKS when it got the monopoly of servicing the rural areas in Sabah. i was told that the government gave FAKs RM35 million subsidy.

After a year FAKs got the monopoly if gave back to MAS but without giving the RM35 million subsidy.

Under the circumstnaces, there is no way Airasia can survive unless Khairy and Kalimullah whisper to the Sleepy Head, when he was asleep!

Anonymous said...

well, why don't the government allow airasia to use the subang airport instead? Airasia never request for a LCCT, infact they wanted the subang terminal badly, it was the gov's bright idea of building the LCCT.

Anonymous said...

whats TF new year/christmas wish list ..subang airport..it came out in the newspaper article.. if badawi still in power in next election..he will get his wish fulfill..

dude 2:03am ..u know how noisy it is for a plane to fly over your house?

A KADIR JASIN said...

Sdr Rocky's Bru,

I have always thought that the AirAsia story is too good to last.

I would not suprise me if it makes a hefty loss or is taken private.

There's too much hype and not to mention changing of direction and PR exercises, mainly to push up market valuation of the company.

Taken private is one way of stopping the market from revaluing its shares.

If the market is allowed to revalue its shares, AirAsia may find it hard to defend its share value on the Bursa and this may affect its ability to manage its massive borrowings and even its cash flow.

But I am sure that not even the government wants or will allow AirAsia to fall.

There's too much at stake.

Just consider the personalities that make up the airlines and their close ties with the government, in particular the PMO.

It does not surprise me a bit if the government or its agencies will rush to the aid or AirAsia either via capital injection or soft loans.

I was made to understand that a Chinese-owned property company has been given the concession to build the coastal highway from Klang to Taiping and was "given" a soft loan of RM800-million.

A Minister from Sarawak is said to play a key role in this deal. I was also informed that a key Umno supreme Council member is a substantial shareholder.

I hope the solf loan bit is not correct.

If the present government is adamant about not wanting to worsen the subsidy situation, it should not be subsidising toll highway construction.

If such a project is not bankable, it should not be carried out. After all the users will have to pay toll. The company, if I am not mistaken, is Talam.

Bru, please check on this one and blog. Also the new Sime Darby was given a RM15-billion negotiated undersea cable contract from Bakun to Johor yet it plans to give VSS to 30 drivers.

Thank you.

Anonymous said...

I had always thought Tony as a big fake especially with his put on accent. He can't decide whether he wants to be English or American.

As one commentator posted on one blog. "Mat Salleh punggok hitam."

drMpower said...

first commenter, 'Sleepy Head' is just awesome. i couldnt come up with anything better than that.

ayirAsia is not a joke actually. its a 'masterpiece' of what those political cables can do. somesay. tony gets what tony wants.

so. tony wanted an airport which was built by the government, in the name of cheap airfare tickets, but it is actually tony's properties.

of course they say, for the need tiger's skin, something had to give in. sacrification is a must. maybe to ensure progression, like the Black Musa said about NEP policy to be abolished in WPI.

I do agree that, the 'national service' imposed by those big, blue chip companies of Malaysia should be reduce as per case by case basis. we cannot ask them to give so much discount or bail the rakyat out. because businesses are all about red which means loss and blue, which is about profits.

this tony wanted to be another richard branson. expect him to cross English channel like branson used to do in aqua vehicle.

or go and do bungie jumps from tall buildings.which i think, tony has not the ball to do it.

but hey, tony's now an actor!

lol

skilgannon1066 said...

Salaam, Pak Rocky

Interesting that you should post this about Tony Fernandes. Especially when the TODAY newspaper in Singapore did a flattering write-up ("Sweet success for fighter") on Tony in today's edition (http://www.todayonline.com/pdf_open.asp?id=1401NSL006). Check it out, Pak.

Will AirAsia de-list from Bursa Malaysia? Possible if key shareholders feel that the company is under-valued. Imagine the reaction if AirAsia re-lists on the Singapore Exchange! I bet that the Malaysian govt will go bonkers!

BigDogDotCom said...

BigDogDotCom,

Is is easier to dispose/pump Air Asia, into another company, say a GLC perhaps, after they have gone private, instead of being a plc and have to satisfy all sorts of stringent SC and Bursa Malaysia ruling?

After all, the company is vitually "assetless", except for just some "tables and chairs" when they went listing, issuing 800 million shares @ RM 0.10 .

How AirAsia, being vitually "assetless" and allowed to make a commitment of ordering 100 A320s is really beyond me!

Some how rather it is a new 'trend
that recently, few companies have been taken private. This include Maxis.

Maybe your friends in BT can help us digress more on these related issues. I for one, am interested to follow.

NURAINA A SAMAD said...

i'm sorry-lah. I think Tony's crime is that he is so closely linked to ..well, you know who.
but he is a businessmen...and as far as i know, business and politics in malaysia is like gin and tonic (I'm quoting the English doctor who prescribed that I take my ventolin inhaler together with my "cant remember the name" inhaler for my ashtma -- the're like gin and tonic..must be taken together).
business and politics in malaysia goes hand in hand. Undeniably so.

it's been like that for aeons and will continue to be so.

and i do not agree that AirAsia was a big joke from the start.
I think Tony did well then by starting AirAsia.
I thought so then, and I do still so to.

But, you know, he had all these people courting him as much as Tony courted them.
They saw a very good thing and they went for the ride.
Of course, that only "spoilt" the broth. Besides it put Tony in a very unenviable position of being close to..er er..them.
Another blue-eyed boy..yeechh!
Malaysia Airlines seemed to have been sacrficed for that whole leg for Tony and AirAsia.

Ok ok...so I am not an economist...but this seems to be the picture I get.

And you and I know there are many people out there who want to see Tony and AirAsia go down...but for the wrong reasons.

I so agree that they should have given Air Asia Subang Airport.

Still...I wish Tony the best.

caravanserai said...

The cronyism works
In the corridors of power
No dark shadow no light of day
Silent whisper money will be made

Hidden agendas
White lie with smile
‘Read my report pay my due
Everybody in the same boat
Get a share of my genius’

Speculative hedging
Get the shares in premium
When the smoke rises
Cash it in makes the killing

Millions in profits
The heady spin investors came
Small and big ones
They want a share of it

The cracks will appear
Hardly people notice
Reports will be made
The cronyism waves it away

Listed in public
Get people to play
When it is done
Now wants to take private

The snoring rings in the silence
The sleeping beauty doesn’t understand
Numbers and strategies
Let the sidekicks rocking free

The Stock Exchange
The playground of the cronies
Paste it, lick it and cut it
All the while money is the motive

The Stock Exchange better passes rules
Nobody can take a company private once it is listed
The BN plays the game now others following through
The smell of freedom in everything they do

rocky(original) said...

air asia is no joke. They have done well so far and as I see it is a challenge for any company to keep the growth and the wonderful news going. They will face their bad times and maybe this is one they have to deal with.

anyone could have done AirAsia.Hicom was sitting on it for a long time but only Tony and a few made it happen and became rich.was it a free lunch that many others got? No. You can blame for doing it except kicking yourself cos the L cost airline model was out there, Tony didn't invent it. So be envious but be fair to AA.

as for the LCT, the govt built it.Guess t cost RM108 million. How many have used it...AA claims they fly 10million a year.The terminal has been used for close to 2 years, so say 8million have used at average RM20 airport tax...RM160 million. Not bad of a return to MAB. Investment recovered unlike the other many govt projects.

Soft loans. Damn every one gets soft loan. Plus makes tons of money and yet get soft loans. why does the govt give out deals like this. what is wrong with the EPU and the BN govt.

anyway I wish TF & Air Asia the best cos I use them and need their cheap fares which helps keep my cost down and allows me to chase more overseas business. but please no bail outs and if he wants to take it private, hell it is his money. why complain? Jealous ka?

I agree with Nuraina's view. Lots of ppl wanted to jump the AA wagon and more so with an excuse of wanting to get the bumiputra portion.

Tony No Connection???? said...

Tony Fernandes: Zero Political Connection???

http://maverickysm.blogspot.com/2007/12/tony-fernandes-zero-political.html


Tony Fernandes, AirAsia CEO said: "We were just 3 guys from the music industry with not a lot of money, no experience, no political connections - zero. No one can say that no one gets equal opportunities. I did. I am living proof that we can.

skilgannon1066 said...

No, no, Cik Nuraina. MAS screwed itself into a hole well before Tony F & AirAsia appeared on the scene. Think back to the days when Tajuddin Ramli was running MAS!

I always like to compare MAS against Spore Airlines, as an indication of what MAS could have been...

Or for that matter, compare KLIA against Changi Airport, but that's another subject for another rant another day!

The fact of the matter is that AirAsia (Tony F being the public face of the airline) has 175 Airbus A320 aircraft in operation and on order. And they are getting the financing (from internal funds, hardheaded bankers, business "angels" or whatever) to fund these aircraft purchases.

And Tony has said publicly that AirAsia will defer the purchase of another 50 A320s that it has on "option" for at least a few years. That is prudent thinking.

And how is AirAsia different from, say, Jetstar Asia, Tiger Air, Jet Airways or Cebu Pacific in this region or from Virgin Blue in Australia, Ryanair in Europe or Southwest Airlines in the US?

Seems to me that Malaysians are all too fond of cutting "tall poppies" down to size (to borrow an Aussie term). Maybe some people can't stand to see other people becoming successful, rich and having fun - all at the same time!

Mr Bojangles said...

Heard over the intercom after the plane landed: "Thank you for flying Air Asia. We hope you enjoyed giving us the business as much as we enjoyed taking you for a ride."

Hamzah said...

"...Maybe some people can't stand to see other people becoming successful, rich and having fun - all at the same time!..."

yup, this is racial issue with some people, the bumi portion of AA, if TF is a bumi you will hear 1001 arguments in support of bailing a bumi company out - ala MAS, buy shares back double the price at Bursa!

No biz gonna be rosey all the time, let see what TF is made of in piloting the turbulance sky.

pash said...

All that is hot air...must come down..like the Zeppelin..used to have admiration for Tony, but then fizzled out after knowing he is just a frontman and Indian with blue eyes...

Anonymous said...

guys,

I do appreciate Air Asia for giving us the option to fly (slightly) cheaper than MAS.

But I would like to ask TF on how he manage to succed in such a record time while other airlines is suffering.

Given the business model of Ryan Air ( another succesful airlines based in EUrope ) on how they offer a real option of flying cheaper than other major airlines in Europe.

guys, I really impressed how much cheaper they are than not only the major airlines but also Air Asia.

Note : no admin charges, extra cost etc etc and you get a very cheap fare is there are seats available at the last minutes.

a pure supply & demand theory are being applied here.

And not only that, there are no big fish connection, monopoly and imagine having to compete all the major Europe airlines flying all the routes. Not to mention the smaller ones.

Now this what I called a real Budget Airlines.

Try them guys, at www.Ryanair.com.

cleopatra said...

when Pak Lah is no more, then you can bet your bottom dollar that Tony will dump those guys real fast.
While he may be benefiting from his close association with them, they are really a burden to him.

skilgannon1066 said...

Both Ganesh and Jeff Ooi seem to have Tony Fernandes and AirAsia in their sights.

One wonders why. Normal business reporting (freedom of the press, yadda yadda)?

water snake said...

Now everybody can fly

And everybody gets delayed

Soon all of us taxpayers will be made to pay to rescue AirAsia.

Thanks to Tony Big Talk Fernandez, Kaliullah, First Son-in-Law and ECM Libra Mas is a eunach and AirAsia may end up HotAir....

BigDogDotCom said...

Rocky,

Bulletin Utama TV3 just featured this. They interviewed Tony Fernandes and he denied the rumour that he was taking AirAsia private.

BrightEyes said...

Despite its cheap tickets, Airasia made 2 mistakes:

- bad customer service: In fact, "customer service" is a word probably nonexistant in AirAsia. Im sure you have your horror stories...

- overexpansion: All this hype about buying many planes & cheap tickets to UK, a wannabe Richard Branson, etc. At the end of the day, its results that counts

Lets see how Tony deals with this. Will he use his shrewd business ways to solve this or will he ask for a bailout like MAS?

Actually, constructing the lowcost terminal in some godforsaken corner of KLIA has been beneficial for MAS. No longer do they have to fight with AirAsia for parking at the main terminal.

Instead, AirAsia's passengers have to go all the way through several traffic lights to the LCCT, or take a smelly old bus from the main terminal.

Giving AirAsia the Subang airfield would kill off MAS's domestic services as Subang is just next door to KL.

Speaking of Subang, I won't go into MAS lack of foresight to develop Firefly into an airline that would rival AirAsia.

Anonymous said...

Skilganon 1006

Jeff Ooi is an advertiser not for nothing ok. You think LG advertise in his blog for nothing. Entrepreneur will only do favour if there are benefits of one form or another. This is a simple equation.

Therefore, you cannot blame Jeff Ooi for avoiding taking on Tony Fernadez/Airasia or helping him in one way or another.

He join the DAP because he believe that he can be an MP after the next general elections. It seemed Jeff Ooi was gifted to be MP for Serdang but with the recent sacking of Jack Wong (the former DAP leader in Serdang) who has vowed to fight Serdang as an Independent. Jeff Ooi may have to get more fund from LG and other 'advertisers' to realise his dream to be MP because he has no grass root to support him and furhter he and Tony Pua are been "helicopter" candidates.

Good luck Jeff Ooi, try Tony Fernandez also.