Does Fernandes Has Silver Bullet For AirAsia?

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Jan 03 2007
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EasyJet (LON : EZJ) and Virgin Group have denied the report of a teaming with AirAsia (KLSE : AIRASIA, stock-code 5099) today, according to Reuters. “We are not joining any alliance,” EasyJet spokesman Toby Nicol said. “The whole low-cost airline business model is based on simplicity,” he added, noting alliances with other airlines involve costs and complications. Virgin Atlantic spokesman Paul Charles said: “It’s nothing to do with us. AirAsia clearly have their own plans and it is up to them to announce them.”

AirAsia chief executive Tony Fernandes, however was not immediately available for comment. AirAsia has said it will make an announcement on Friday in Kuala Lumpur with the Malaysian transport minister set to attend. AirAsia stock rised about 7.28% today to 1.62 ringgit while the call-warrant was up 50% to 0.36 ringgit on the speculation.

On Saturday Fernandes said there was a potential for a budget long-haul air service model. He further commented that it’s a matter of time before a better business model for a low-cost carrier be innovate. So, just what is up the sleeve of this young and innovative Fernandes? With the denial from EasyJet & Virgin Atlantic, does Tony has other silver-bullet(s) to spring a surprise for everyone? There could be three possibilities:
  1. An announcement of a team-up with other players other than EasyJet and Virgin Atlantic but there’re not many quality players left to partner with.
  2. An announcement of a new service (cargo and long-haul) of which AirAsia is going lone-ranger for the time being – most likely since the Friday’s announcement involves Malaysia transport minister.
  3. An announcement of a team-up with either EasyJet or Virgin Atlantic but not both – a phase partner rather than a big-bang.

Whatever the announcement, it has to be positive knowing Tony Fernandes who’s not short of great and innovative ideas in creating values for AirAsia.

# TIP: With this denial, AirAsia stock price should correct itself tomorrow, Thursday 4-Jan-2007, but for risk-taker this will be the opportunity to buy in anticipation of an optimistic announcement by Tony on Friday.

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