Falling jet fuel prices positive for Capital A

Capital A Bhd, the holding company of budget carrier AirAsia, could benefit from a recession, as dropping jet fuel prices are likely to lift the Practice Note 17 (PN17) company’s margin substantially. In a note, Maybank Investment Bank (IB) Research analyst Samuel Yin Shao Yang said lower fuel prices would require Capital A to lower its fares, which in turn could lead to more seats being sold. During the 2008-2009 global financial crisis, Yin said that AirAsia’s operations in Malaysia passed on the lower jet fuel prices to customers by lowering fares. He, however, noted that fares fell slower than jet fuel prices. “We know this because it is revenue/available seat kilometre less cost/available seat kilometre spread, which is essentially a gauge of operating profit, swelling to 4.1 sen in financial year 2009 (FY09) from negative 1.8 sen in FY08,” stated Yin. In 2009, the average fare for AirAsia Malaysia was RM168 as compared to RM204 in 2008. In comparison, the average fare of AirAsia Malaysia last year was recorded at RM204, the highest level in 14 years. The high average fare in 2022 was the result of high jet fuel prices, which surged on the back of increased crude oil prices. Story has details.<br/>