Regional airlines could benefit from deadly Lion Air crash, say Nomura analysts

OCTOBER 30, 2018 - 12:15 PM

REGIONAL rival carriers are likely to benefit from Monday’s horrific Lion Air crash, Nomura analysts have said, although they warned that passenger growth, especially in Indonesia, could slow over the next three to six months as travellers steer clear of airlines.

All 189 passengers who were on board Lion Air flight JT610 are now feared to be dead, after the aeroplane plunged into the Java Sea soon after taking off on Monday morning from Jakarta’s Soekarno-Hatta Airport.

Ahmad Maghfur Usman and Divya Thomas wrote that AirAsia and Garuda - listed competitors of the privately held Lion Group’s Indonesia, Malaysia and Thailand carriers - could reap growth opportunities by gaining market share, as could Thai Airways and Singapore Airlines.

Competing carriers may see a temporary lift in yields, or airfares on a per-kilometre basis, as Lion-shy passengers accept higher airfares, the Nomura analysts said in a report on Tuesday.

Garuda and Indonesia AirAsia could now pick up market share from Lion Air in their home market of Indonesia, they said, citing Garuda’s yield growth after Malaysia Airlines and Indonesia AirAsia suffered three separate air disasters between March and December 2014.

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“Other carriers that could potentially benefit are Singapore Airlines and AirAsia Group's Malaysia AirAsia and Thai AirAsia, noting that their competitors, Malindo and Thai Lion Air - partly owned and managed by Lion Group - could suffer from the negative publicity,” they said.

But the analysts added that Garuda, Indonesia AirAsia and Lion Air have been loss-making for the last two years “and we estimate both Indonesia AirAsia and Garuda will remain in the red this year”.

Nomura has a “reduce” call on Garuda and Thai AirAsia, a “neutral” on Singapore Airlines and a “buy” rating on AirAsia Group.