AirAsia shares drop sharply After Flight to Singapore Vanishes

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The Kuala Lumpur-traded shares of AirAsia had fallen 7.8 per cent as of 0320 GMT, their biggest one-day drop in more than three years after one of its aircraft went missing on its way to Singapore from the Indonesian city of Surabaya, since September 22, 2011. The stock had dropped as much as 12.9 per cent to RM2.56 (S$0.97) after the opening at 0102 GMT, compared with a 0.4 per cent decline in Kuala Lumpur's benchmark index. The Airbus A320-200 departed the Indonesian city of Surabaya around 5:30 a.m. local time. Air controllers lost contact with the plane at around 6:17 am local time, in what was typically a two hour flight. There were 162 people on board the flight, including seven crew members. The overwhelming bulk of those on board were Indonesian, with a mix of nationalities from South Korea, Singapore and Europe, according to AirAsia. The plane's disappearance became the third missing plane linked to Malaysia this year, and capped a string of commercial air disasters this year.

The stock slid as much as 13 percent to 2.56 ringgit and was 8.2 percent lower at 11:31 a.m. local time. Shares were cut to a trading sell from buy at Hong Leong Investment Bank Bhd., which lowered its price target to 2.64 ringgit from 3.15 ringgit. AirAsia X Bhd. (AAX), the long-haul arm of AirAsia, fell 6.6 percent. The FTSE Bursa Malaysia KLCI Index was little changed. 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 biggest tumble in three years came after Indonesia resumed its search for the missing Flight 8501 early on Monday.

The Bangkok-listed shares of Asia Aviation, the holding company for Thai AirAsia in which the AirAsia group holds a 45 percent stake, fell 3.6 percent on Monday. Indonesia AirAsia is 49 percent 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. Indonesia resumed its search for the missing jetliner QZ8501 at first light 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 unrecognized losses, which could take several quarters.

"The market reaction is quite natural. I am not surprised," Shukor Yusof, founder of aviation research firm Endau Analytics, said, according to Agence France-Presse, adding: "I think investors confidence will return quickly since the airline has a solid business model."

AirAsia Bhd. is primarily a short-haul, low-cost carrier that was founded in 1996 and listed on the main market of the Bursa Malaysia Securities Bhd. in 2004. The company has made a successful business of offering heavily discounted air fares on national and international routes in Asia. According to AirAsia CEO Tony Fernandes, the group has carried 220 million passengers in 13 years, and had no fatalities prior to the disappearance of flight QZ8501.