By Al-Zaquan Amer Hamzah and Anshuman Daga
KUALA LUMPUR/SINGAPORE (Reuters) - As AirAsia Bhd grapples with its first airliner disaster since its founding a dozen years ago, Asia's biggest budget carrier will have little margin for error given tough competition and thin profits in the sector.
Even before an Indonesia AirAsia flight went missing on Sunday night with 162 on board, presumed to have crashed off the Indonesian coast, affiliates in Thailand and the Philippines as well as its long-haul unit were posting losses while its Indonesian unit eked out only a tiny profit in the latest quarter.
Several analysts believe the incident could deter some passengers from using the airline, at least in the short term, with an outsized impact on its bottom line.
"Given the thin margin nature of the airline business, our calculations suggest that a 1 percent decline in IAA (Indonesia AirAsia), Malaysia AirAsia and Thai AirAsia's 2015 passenger traffic will result in a 13 percent reduction to AirAsia's 2015 net profit," CIMB analysts Raymond Yap and Jian Bo Gan said in a report.
The group is locked in fierce competition with regional rivals such as Malaysian Airline System Bhd, Qantas unit Jetstar, Indonesia's Lion Air and subsidiaries of Singapore Airlines.
With the AirAsia livery displayed prominently on the missing aircraft, the CIMB analysts expected the AirAsia group's Malaysian and Thai carriers would also be affected by the incident.
"But unless there is a second incident in the very near future, the AirAsia group's strong safety track record and very attractive commercial offerings may help limit the contagion and ensure a speedier demand recovery," they added.
Both the Indonesian and Malaysian aviation sectors have come under scrutiny after a series of accidents which have spooked air travelers and spurred action by safety authorities.
Indonesia said it would review the Indonesian operations of AirAsia to improve safety. Indonesia AirAsia is 49 percent owned by AirAsia, with local investors holding the rest.
SHARES FALL
Investors concerned about the incident's impact sold shares of the company and its affiliates on Monday, with AirAsia ending down 8.5 percent at its lowest close in a month on volume of 103 million shares, 10 times the average volume. During the session the shares had fallen as much as 12.9 percent.
Still, they are up 22 percent for the year so far, compared with a 5 percent fall in the Kuala Lumpur benchmark index.
Shares in Asia Aviation PCL, the holding company for Thai AirAsia in which the AirAsia group owns 45 percent, fell 2.3 percent on Monday.