Air Asia: People will still want to fly

By Biz Times

BUDGET carrier AirAsia Bhd expects to resolve any outstanding issues it has over the Low-Cost Carrier Terminal (LCCT) charges in two weeks.Group chief executive officer Datuk Seri Tony Fernandes said he met with Malaysia Airports Holdings Bhd (MAHB) managing director Datuk Seri Bashir Ahmad on Monday to discuss the amount it owes the airport operator."I am optimistic that we can resolve this because it was a meeting of minds... the issue with MAHB is coming to an end," he said, but did not elaborate.Fernandes was speaking to reporters at the inaugural session of investPenang's "The CEO Speaks" series in Penang yesterday.

Fernandes presented a talk on "Branding: Jazzing Up Your Business", which was launched by Penang Chief Minister Lim Guan Eng.AirAsia is disputing the amount it owes MAHB because it believes that charges at the LCCT should be lower than the KL International Airport's main terminal.It was reported that the actual amount accumulated since 2002 varies from the RM60 million mentioned in some reports to up to RM110 million as reported in Parliament.The matter was reported to have been brought to the Finance Ministry to resolve."It is a bonus for us to clear that," Fernandes said, adding that the low-cost carrier business is a new one and therefore took a little longer for various parties to understand its operating concept.

Asked whether AirAsia is planning to settle its debts with MAHB, Fernandes said: "We have resolved whatever historical issues which are outstanding and will need further discussions on the future."On the business outlook for AirAsia amid rising fuel costs, Fernandes said: "Despite 24 airlines around the world going bust, I am optimistic that people will still want to fly and we will continue doing what we are doing and ride through the storm."

AirAsia jumps most in 3 years

By Biz Times

AIRASIA Bhd, Southeast Asia’s largest low-cost carrier, jumped the most in more than three years in Kuala Lumpur trading, leading airlines higher, after the price of oil fell to a six-week low.The carrier rose 8.7 per cent to RM1 at 1.30 pm. Qantas Airways Ltd gained 5.6 per cent to A$3.58 in Sydney. China Southern Airlines Co, Asia’s biggest carrier by passenger numbers, surged 10 per cent to HK$3.43 in Hong Kong.Oil fell to US$127.95 a barrel yesterday in New York, down almost US$20 from July 14’s record close, on forecasts that Hurricane Dolly would miss oilfields in the Gulf of Mexico. Lower oil prices help airlines by cutting the cost of jet fuel, most Asian carriers’ biggest expense.“The drop in crude oil prices is definitely driving gains in airlines today,” said Um Kyung A, a Seoul-based analyst at Shinyoung Securities Co. “Still, there’s long way to go for airlines to turn profitable.”

Korean Air Lines Co, South Korea’s largest carrier, gained 5.4 per cent to 47,900 won in Seoul. Air New Zealand Ltd rose 7 per cent to NZ$1.23 in Wellington. Malaysian Airline System Bhd, the country’s national carrier, jumped 4.8 per cent to RM3.50 in Kuala Lumpur.In Hong Kong, Cathay Pacific Airways Ltd, the city’s biggest carrier, gained 5.2 per cent to HK$15.48. Air China Ltd, the world’s biggest airline by market value, climbed 5.4 per cent HK$4.49. Singapore Airlines Ltd rose 3.4 per cent to S$15.78 in Singapore.Airlines PlungeAirAsia has plummeted 38 per cent this year amid concerns that a near doubling of jet-fuel prices and a weaker ringgit will crimp earnings. The Bloomberg Asia Pacific Airlines Index, which tracks 17 airline stocks, has plunged 39 per cent.Surging fuel prices have forced airlines across Asia to raise surcharges, cut services and ground planes in a bid to defend profits. Qantas said last week it would axe 1,500 jobs worldwide, cancel plans to hire new staff and ground as many as 22 aircraft. Korean Air expects to post a second-quarter operating loss, president Lee Jong Hee said on July 17.The price of jet fuel rose 0.5 per cent to US$165.20 a barrel yesterday in Singapore. That’s 9.2 per cent lower than July 3’s record close of US$181.85. - Bloomberg

Malaysia's 2008 growth forecast cut to 4.6pc

By Biz Times

THE Malaysian Institute of Economic Research (MIER) has cut its forecast for the country's economic growth to 4.6 per cent from 5.4 per cent this year amid rising inflation and political uncertainties."It is likely that growth which would exceed five per cent in the first half, would deteriorate in the second half of the year as the economy takes the hit from the knock-on effects of higher oil prices and slower growth of our trading partners," said executive director Professor Datuk Mohamed Ariff Abdul Kareem.Speaking at a briefing in Kuala Lumpur yesterday, he warned that the current political instability may put off stock market investors as well as tourists."We are still one of the better economies in the region - comfortable foreign reserves, high savings rate, potential strength of the ringgit, high commodity prices, sound banking system - all support the economy, but if we can do something about the political situation I think the economy can do better than it can."

Domestic demand will be propped up by government spending, which would partly cushion the blow from a faltering global economy.MIER expects the economy to improve next year, expanding by five per cent. However, this could change if a global recession affects commodity prices.Soaring food pries and the rise in global oil prices are weighing heavily on economic prospects."Even with the subsidy cut, the fiscal deficit may reach 3.5 per cent of GDP this year as oil prices have increased further, drastically reducing the savings from the subsidy revision. The government would still have to fork out RM18 billion or more for fuel subsidy due to the subsequent hikes."

Malaysia Banks will be biggest winners: Analysts

By Biz Times

BANKS will emerge the biggest winners from a proposed move to ease customers’ housing loan payments.

Banking analysts contacted yesterday said home financing is a major business for most major banks and extending the loan tenure by even a minimum of one year could bring more income for the banks.

However, not many customers will opt for this “aid” as a longer loan tenure means extra burden.
“As it is, the duration of mortgage loans is usually up until the borrowers are 60 to 65 years old, and by adding an extra five to 10 years to that is undesirable,” one analyst said.

He added that most banks have already put in place a mechanism to help their customers restructure their loans on a case-by-case basis.

One such bank is Malayan Banking Bhd (Maybank), which has welcomed the call by the government for banks to assist borrowers with payment plans.

“Although we have not advertised the additional financial assistance, we have been offering our customers the flexibility to restructure or reschedule their financing on a case-by-case basis to ensure they are able to continue to meet their financial obligations,” said Maybank chief executive officer Datuk Seri Abdul Wahid Omar.

He said the bank will continue to engage with its customers and monitor the current position with a view to providing additional financial advisory services to customers in need of such assistance.

Second Finance Minister Tan Sri Nor Mohamed Yakcop told the Dewan Rakyat on Wednesday that the Finance Ministry is in discussions with banks to reduce the monthly repayments for housing loans to lessen the financial burden of the lower-income group.

Another analyst admitted that such a scheme would most likely attract low-income earners with housing loans of RM100,000 and below.

“This new arrangement can help banks reduce their cost in managing possible non-performing loans by this group of income bracket,” he said

Fans camping out in Asia for new iPhone launch

By Biz Times

Seeking to be one of the world’s first to grab the new-generation iPhone, fanatical Apple fans around Asia are queuing up two days before its launch, not discouraged by rain or freezing temperatures.The July 11 launch will be the first chance for Asian consumers to own an iPhone, and related websites have been swamped with inquiries and early orders.In Japan, one of the world’s most advanced mobile markets, about 20 people were lined up outside Softbank Corp’s flagship mobile store in Tokyo yesterday morning, with a sign at the head of the queue reading “We Love iPhone”. “The big appeal (of the iPhone) is that this is an Apple product,” said Hiroyuki Sano, a 24-year-old graduate student who early on Tuesday arrived in rainy Tokyo from Nagoya, 360 km (225 miles) west of the capital, to be first in line.

He will turn 25 today while waiting to get his hands on the high-end version of the iPhone with 16 gigabytes of memory.Apple also offers an entry-level version with an 8 gigabyte memory.“I’ve told my professor I was going to go buy an iPhone, and he gave me permission,” said Sano, wearing a T-shirt with an Apple logo. “He is an Apple-lover too, and he sent me off cheerfully.” The long-anticipated 3G iPhone, which has faster Web links than its predecessor and supports third-party applications such as games and email, will debut in Japan, Hong Kong, Australia, and New Zealand on Friday as part of the global launch in 22 countries.The original iPhone was only available in the United States and Europe, and the next-generation model is expected to go on sale in 70 countries by year-end.

Softbank, Japan’s third-biggest mobile carrier, will start selling iPhones at its flagship store at 7 am on Friday and expand sales nationwide at noon.Targeting a far bigger market with its new iPhone, Apple slashed the handset price and is allowing carriers to subsidise the phone this time around, making it easier for users to bring home the device.Research firm Enterbrain said 6.7 per cent of 1,200 people it surveyed in Japan wanted to buy an iPhone immediately.

WORLD’S FIRST Four New Zealanders with deck chairs, sleeping bags and a small tent started queueing on a chilly Tuesday night outside the Auckland shop of Vodafone, which will launch the iPhone at 12:01 am Friday, the first in the world.“I’m really just doing it to be able to say that I’m the first one in the world with one of these phones,” 22-year-old student Jonny Gladwell told the New Zealand Herald.Vodafone, New Zealand’s top mobile carrier, is selling the phone for as little as NZ$199 (US$150) in the country if consumers sign up for a two-year contract. Demand for pricing details was so heavy it crashed Vodafone’s New Zealand website on Tuesday.

In Hong Kong, Hutchison Telecom International was flooded by 60,000 online applications over the weekend from consumers who are hoping to grab one of just 500 phones on sale.A number of the more desperate would-be users pleaded online they needed the iPhone to appease demanding wives or stressed it was their birthday, according to Hong Kong media.The only woman in the Tokyo queue said she was securing places in line with her co-workers so that her company, Ubiquitous Entertainment Inc, can own iPhones and develop content for the device.

Despite the hype, analysts say Japan’s 108 million mobile subscribers who are already frequent users of Web browsing and email on 3G networks might not be easily wowed by the iPhone.Most of the people in the Tokyo queue told Reuters they plan to buy the device as their second cellphone.“We can expect certain demand from core Apple fans and others, but there will be users who would hesitate about buying the iPhone because of the high monthly charges of some 8,000 yen,” said Hironobu Sawake, a JPMorgan senior analyst in Tokyo.“Even though there will be other features that are more attractive than ordinary phones, the fact that the iPhone does not offer some features that are available on most handsets could turn off some users too,” he said.

AirAsia to take only profitable routes

By The Edge

Neither AirAsia Bhd nor its associate AirAsia X is jumping in at the chance of taking over all the unprofitable international routes that Malaysian Airline System Bhd (MAS) has given up in the last two years because some of those routes do not make commercial sense.

"We apply for routes that make sense to us, where we believe we can create new markets and offer consumers choice. It does not make sense to have our strategy being dictated by another airline's failures," AirAsia X chief executive officer Azran Osman-Rani told The Edge Financial Daily .

AirAsia X is the long haul budget carrier of AirAsia. He added that it also did not make sense to stop AirAsia X from flying on overlapping routes when foreign airlines were allowed to compete directly with MAS.

Azran was responding to comments by Transport Minister Datuk Ong Tee Keat that AirAsia was "welcomed" to apply for those routes cut by MAS.

Ong told the Dewan Rakyat in a parliament session yesterday that it was up to AirAsia to apply to take over the routes before the requests could be considered.

Those international routes deemed unprofitable by MAS include the Kuala Lumpur-Manchester, KL-Vienna, KL-Nagoya, KL-Xi'an, KL-Kolkata, KL-Padang, KL-Ahmedabad as well as Kuching-Perth, Kuching-Sydney, Langkawi-London and Penang-London flights.

Azran said except for the KL-London route, other European routes were not commercially viable, as its planes to be used for ultra-long haul destinations would not have enough seats to make those routes profitable.

It plans to use an Airbus 340 plane, which would have 390 seats for the KL-London route, which is expected to start commercial service early next year.

"What we want is trunk routes such as Sydney, Melbourne, New Delhi, Mumbai, Tokyo, Shanghai and Beijing, not those non-trunk routes that MAS has abandoned," Azran added.

He said it was vital to enable AirAsia to connect passengers on those trunk routes in order not to lose out to its low cost competitors such as Jetstar and Tiger Airways that were aggressively expanding their networks.

"Competition is biting at our heels. The government should make strategic decisions based on what is good for the country, not reactive to what MAS can or cannot do," Azran added.

Meanwhile, AirAsia chief executive officer Datuk Seri Tony Fernandes said the access to routes should be driven by the principle of safeguarding consumer interest to ensure that there were choices available and competition to keep airfares in check.

"Limiting access to any airline would deprive air travellers of choice and reasonable fares. The issue of non-competition between AirAsia and MAS should not arise because there is overwhelming concrete proof that all routes where our airlines compete, the overall market has grown by leaps and bounds

"MAS has also benefited as it is now making money in the domestic sector, whereby previously it was losing despite being the sole operator," he added.

Fernandes said it would also be a "travesty" to hold back AirAsia X from certain routes, while at the same time, Malaysia Airports was providing incentives to foreign carriers to fly routes that competed head-to-head with MAS.

"Moreover, history shows that these foreign carriers such as British Airways, Air France and now Jetstar have no loyalty to KLIA - retreating at the first sign of trouble," he added.

Inflation likely to hit 6-7pc in June 2008

By Biz Times

BASEL (Switzerland): Malaysia’s inflation is likely to have hit six to seven per cent in June and the central bank would take action on monetary policy in the event of generalised price increases, Bank Negara Malaysia Governor said yesterday.

In an interview, Tan Sri Dr Zeti Akhtar Aziz also said that domestic factors, including recent cuts in fuel subsidies, and a slower external economic environment could lower the growth rate below five per cent this year.

Costlier food and energy prices pushed Malaysia’s May inflation to a 22-month high of 3.8 per cent, even before the government raised domestic fuel prices in June.

“We expect inflation to rise, especially in the month of June following one of the adjustments by the government — the reduction in subsidies. Therefore, for the month of June, inflation is likely to be between six and seven per cent,” Zeti said here.

“We will monitor it very closely — whether this results in the pass-through to other consumer items and whether there are any second round effects like wage increases ... And the central bank will be prompted to take action in the event that it becomes a generalised price increase.”

Joining a growing rank of Asian countries unable to maintain hefty subsidies in the face of soaring oil prices, Malaysia raised petrol prices by 41 per cent this month and lifted diesel prices by 63 per cent as part of a broad reform of energy policy to prevent subsidies from eating up a third of its budget.

Zeti said when setting interest rates, Bank Negara had to assess effects of both higher inflation, as well as domestic and external factors moderating growth.

Zeti has said that the central bank had no immediate plan to hike interest rates if inflation tapers in the second half in line with its forecast.

The cost of borrowing has stood at 3.5 per cent — one of Asia’s lowest — for the 17th straight policy-setting meeting.

“Interest rate is an instrument of policy to deal with demand-driven inflation,” Zeti said.

“Our interest-rate policy is forward looking. We will look at what the risks are — upside risks to inflation and downside risk to growth as a result of a slower external environment, and as a result of a moderating impact of higher energy prices.”

Asked if investors were wrongly betting on a possible quarter- or half-point increase in interest rates, Zeti said:

“The market is assessing it, based on a price increase, and it is not wrong to assess that indeed prices are going to increase, based on the adjustment Malaysia has taken.”

Inflation is a problem vexing the broader Asia region’s policymakers.