Analysts see better days ahead for AirAsia, trim target prices

KUALA LUMPUR — Analysts foresee a brighter outlook for AirAsia Group Bhd, with target prices being reduced as fuel prices decrease and travel demand persists, despite a weak second quarter. PublicInvest Bank lowered its FY26 to FY28 earnings forecasts by 27% and Hong Leong Investment Bank trimmed its target price. Both maintain a neutral or buy recommendation, citing the shift towards a margin-over-volume strategy, capacity optimization, and fare hikes to safeguard yields.

AirAsia is still committed to its margin-over-volume approach, network optimization, and controlled capacity deployment. Fuel prices have eased to $140 to $150 per barrel, providing a $10 per barrel buffer for AirAsia. The research firms anticipate a stronger recovery in the fourth quarter, due to improving travel demand from China and intra-Asean markets, and a planned capacity restoration to 2025 levels.

However, geopolitical uncertainty, fuel prices, and the US dollar's movement remain risks to AirAsia's earnings. Both research houses also highlighted the airline's deteriorating balance sheet, with equity falling to RM483 million and stable cash reserves. Management remains confident in AirAsia's recovery, supported by access to $1 billion and RM700 million in funding facilities.