The RM26.7 million claim by Malaysia Airports Holdings Bhd (MAHB) from AirAsia X Bhd (AAX) for uncollected passenger service charges (PSC) will not have any material impact on the airline’s operations.

“In the event that AAX would have to reimburse the RM26.7 million worth of uncollected PSC to MAHB, the impact would not be material to AAX’s day-to-day operations as the company has generated a net operating cash flow of RM47.3 million on average for the past three quarters. Moreover, AAX has a net gearing which is still manageable, remaining below 0.7 times after considering such payments to MAHB,” MIDF Research said in its report.

On Tuesday, AAX told Bursa Malaysia that it was served with a writ of summons by MAHB worth RM26.7 million for uncollected PSC since July 1, 2018, which is in relation to the RM23 additional charge per passenger for international passengers since AAX has only been collecting RM50 instead of RM73 per passenger.

MAHB stated that same rates should apply to both klia2 and Kuala Lumpur International Airport (KLIA). However, AAX reiterated its stance that klia2 is a low-cost airport and the charges levied should commensurate with the level of services provided.

“Future adherence to the full PSC could push average fares upwards to sustain margins but we believe this will be partly mitigated by AAX’s prudence in shifting some of the future capacity into other core markets namely, Japan, South Korea and India to factor in the slower growth from the China segment,” said MIDF Research.

It noted that a re-rating catalyst for AAX would be the possible equal downward revision of PSCs for klia2 and KLIA without any plans to reverse out any previous charges according to the Malay-sian Aviation Commission (Mavcom).

It maintained its “neutral” call on the stock with an adjusted target price of 22 sen per share.

Meanwhile, AirAsia Group Bhd’s (AAGB) deal with Castlelake LP indicates AAGB’s aspirations to invest in shifting from being asset-heavy to being more digitally focused.

“Operationally, AAGB has partnered with Airbus and Palantir to establish an integrated Big Data platform which includes forecast of predictive maintenance and efficient scheduling of parts with a potential saving of US$40,000 per aircraft per year,” said MIDF Research in a separate report.

On Tuesday, Reuters reported that Castle-lake, a US private investment firm, has signed a deal to acquire about 30 narrowbody planes from AAGB for about US$800 million (RM3.34 billion).

The deal entails the purchase of AAGB’s older aircraft, which are under lease to AAGB’s affiliated airlines and is expected to be concluded in a few weeks.

“Previously, management noted that there will be a net addition of 24 aircraft in FY19. Taking into consideration the sale of 30 aircraft to Castlelake, there would be a net reduction of AAGB’s fleet (including other AOCs) by six aircraft. As such, we expect aircraft utilisation across AAGB in FY19 to increase above the 2.2% recorded for 9MFY18,” MIDF Research said.

If the acquisition is satisfied via cash, AAGB’s cash pile would increase to about RM7.77 billion, translating into a net cash position of about RM4.57 billion. Meanwhile, the writ of summons by MAHB to AAGB worth RM9.4 million is only less than 1% of its cash pile and FY18F/FY19F earnings.

“Therefore, AAGB’s financial health will not be adversely impacted in the event that AAGB has to reimburse the monies owed to MAHB,” it added.

It maintained its “buy” call on AAGB with an unchanged target price of RM3.48 per share.

AAGB shares were down 10 sen or 3.8% to RM2.54 today, while AAX declined half a sen or 2.1% to 23 sen. – The Sun