New airline Flymojo no threat to AirAsia

As Flymojo operates in the full-service segment, the new airline is not seen as a near-term threat for AirAsia, says RHB Research

PETALING JAYA: Aviation analysts are not overly concerned about the potential threat from the newly established airline Flymojo to AirAsia Bhd as the newcomer caters to a fraction of the market.

Flymojo, which is operated by Flymojo Sdn Bhd, is understood to be a fully Malaysian-owned. The new airline will be based out of Johor Bahru and Kota Kinabalu and will start operations in the third quarter of this year,

On Tuesday, Flymojo signed a deal with Canadian planemaker Bombardier Inc to buy 20 CS100 aircraft for about US$1.47bil (RM5.44bil).

“We do not see a near-term threat on the setting up of Flymojo, a new airline that will operate out of two hubs – Senai Airport and Kota Kinabalu Airport.

“While Kota Kinabalu makes rational sense as a hub with feeder traffic from smaller tier-2 and 3 cities, we doubt making Senai a hub will work in the near term on lack of sizeable feeder traffic – of which, if any, will be competing against Singapore Changi Airport,” RHB Research said, adding that it maintained its “overweight” stance on the sector with AirAsia as its top pick.

Furthermore, RHB Research said with the high-speed rail connectivity between Kuala Lumpur-Johor Baru-Singapore likely to materialise, this could pose another challenge towards making Senai a sizeable hub for air carriers.

“As Flymojo operates in the full-service segment, we do not see this as a near-term threat for AirAsia. On a positive note, we see airport operators like Malaysia Airports Holdings Bhd benefiting from the entry of a new player,” it said.

AmResearch concurred with RHB Research, saying it did not see Flymojo being in direct competition with AirAsia, which operated mainly out of KLIA2, except, perhaps, for the highly profitable KLIA2-Kota Kinabalu route.

“Other than this, we do not see a new competitor at the Senai hub (which entails much smaller pax traffic than even that of the Kota Kinabalu hub) to be much of a competitive issue for AirAsia in the near term,” AmResearch said.

It estimated that Flymojo to account for just 19% of AirAsia Malaysia’s current capacity after complete delivery of all 20 aircraft that are likely to be spread over three to four years.

Meanwhile, Hong Leong Investment Bank Research (HLIB) is also “not overly concerned” on the potential threat by Flymojo to AirAsia, given its base in secondary airports, which only catered for 11% of total Malaysia traffic.

“Moreover, it is operating a relatively smaller capacity aircraft, at a cost disadvantage, compared with AirAsia and MAS.

“Moreover, Senai has not been able to attract high passenger movements given its low population area as well as lack of connectivity,” it added.

HLIB noted that CS100 was a relatively smaller aircraft with capacity up to 125 seats (based on single type configuration) versus AirAsia’s and Malindo’s 180 seats on A320s and B739s respectively.

Source: The Star Online | 19 March 2015