AirAsia shares dive over missing plane

Kuala Lumpur - Shares in AirAsia fell 11.6% after one of its aircraft went missing in bad weather on Sunday on its way to Singapore from the Indonesian city of Surabaya.

Shares of the Malaysia-based budget airline fell at the start of trade on Monday, after Indonesia resumed its search for the missing jetliner QZ8501 at first light on Monday.

AirAsia fell as much as 12.9% to 2.56 ringgit at 01:02 GMT, its lowest point since November 28, compared with a 0.4% decline in Kuala Lumpur's benchmark index. The stock has gained 21.4% since the beginning of the year.

By 03:02 GMT the shares pulled back to trade at 7.8%, their biggest daily drop since September 22, 2011.

Indonesia AirAsia is 49% owned by Malaysia-based budget carrier AirAsia, with local investors holding the rest. The AirAsia group, including affiliates in Thailand, the Philippines and India, has not had a crash since its Malaysian operations began in 2002.

Analysts said the Sunday incident involving AirAsia's Indonesia unit may cause some travellers to be wary about flying with the AirAsia group, affecting its prospects to improve yields and bolster its profit in the year ahead.

"I was expecting yields to at least maintain on a year-on-year basis in 2015, but now I'm expecting them to decline by up to 5%," said Daniel Wong, an analyst at Kuala Lumpur-based Hong Leong Investment Bank.

The research house downgraded AirAsia from a "buy" to a "trading sell" on Monday morning.

About 59.5 million AirAsia shares had been traded, making it the bourse's most active stock. That was about 5.2 times the stock's average full-day volume over the past 30 days.

The Bangkok-listed shares of Asia Aviation, the holding company for Thai AirAsia in which the AirAsia group holds a 45% stake, fell 3.6% on Monday.

Hafriz Hezry, an analyst with AmResearch, expected the stock to recover within a few days after the market's initial reaction to news of the missing airplane.

AirAsia's reputation at the group level may take a hit, affecting its yield recovery next year, he said, but the impact on AirAsia's earnings would be minimal because its share of the Indonesia unit's profit will not be included in its earnings until the unit has reversed unrecognised losses, which could take several quarters.