KUALA LUMPUR (May 2): Capital A Bhd (KL:CAPITALA) has maintained its performance target for 2025 as it sees geopolitics and US-China tariff uncertainties benefitting low-cost airlines with regional footprint, said CEO Tan Sri Tony Fernandes.
Weaker oil prices and stronger regional currencies as a result of tariff uncertainties will be “favourable to us”, said Fernandes, while the regional aviation industry could see price pressures and geopolitical shifts driving more intra-Asia travel where AirAsia largely operates.
“Shorter trips, cheaper trips... People still want to go on holiday. I've seen it before 2007 and various other recessionary periods,” he said in an interview with The Edge.
“Theoretically we should do better [in the current environment]. Conservatively, we will maintain where we are [in terms of performance targets].”
In February, Capital A set a target of up to RM4 billion revenue for non-aviation business and up to RM24 billion revenue for the aviation business that will soon be merged with AirAsia X Bhd’s (KL:AAX) operations under its Practice Note 17 (PN17) exit plan. Total ebitda before cross-eliminations is seen at RM4.5 billion to RM5.4 billion, the projection showed.
That was before US-China tariff concerns prompted a review of economic activity and growth outlook globally, and which trickled down to concerns over spending power and consumer demand.
That said, oil prices too, fell, amid expectations of weak demand, which is seen benefitting airlines in the process. Brent crude oil traded at US$63 (RM271.68) per barrel at the time of writing, compared with a full-year average of over US$80 per barrel in 2024.
On top of the oil tailwind, part of the Capital A’s performance rebound underlines the aviation business reactivating all 250 aircrafts, including the remaining 16 expected to be operational by July.
The timeline of Capital A’s PN17 exit now requires the finalisation of RM1 billion private placement to fund the aviation business, consent letters from two remaining lenders, approvals from shareholders for its regularisation plan next week (May 7), and for Capital A to post two quarters of profit.
The group is working on improving operational efficiency and customer experience, including partnering more closely with airport operators, and offering new services like refundable tickets announced last month.
A recent fire incident involving a China-bound AirAsia plane in March does not reflect a wider issue involving parts integrity or supply chain disruptions, said Fernandes, who described it as “teething issues” following restart of planes after idling for up to three years in some cases.
In 2024, Capital A’s non-aviation segments posted RM1.5 billion in revenue, up nearly 17% from RM1.28 billion in 2023. In the fourth quarter, all segments reported profit after tax except for its e-wallet and remittance unit BigPay. The other segments include maintenance, repairs and overhaul unit ADE; air cargo player Teleport, online travel agency AirAsia Move, aviation catering and F&B arm Santan, as well as its branding business ABC, which owns the rights to the AirAsia brand.
Shares of Capital A settled up 3.5 sen or 4.4% to settle at 83 sen on Friday, giving it a market capitalisation of RM3.58 billion. AAX shares settled up eight sen or 4.97% at RM1.69, valuing the group at RM755.55 million.