Shares of AirAsia X Berhad and its associate, Capital A Berhad, have plummeted to their lowest levels in over three years amid escalating geopolitical conflicts involving the United States, Israel, and Iran. The downturn has triggered a significant sell-off in the Malaysian airline sector, with AirAsia X experiencing a sharp decline of over 23%, continuing a trend that has persisted since late February.
The market reaction is largely attributed to rising fuel costs, stemming from record-high jet fuel prices in Singapore, which reached US$231 per barrel and have since eased but remain well above historical averages. Analysts warn that such increases could raise airline operating expenses significantly, potentially impacting profitability, though carriers like AirAsia X historically adjust fares and surcharges to buffer these effects.
Additionally, concerns over flight disruptions and rising energy prices have sparked widespread investor fears, pushing the airline's valuation down by nearly half from earlier market caps. Capital A, which was restructured to focus on non-aviation business sectors, also saw its share price degrade, underscoring the broad investor anxiety.
Despite the current downturn, some strategists see opportunities emerging from the crisis. For example, restricted Middle Eastern airspace may lead airlines like AirAsia X to explore alternative routes, including those connecting Europe to Asia via Central Asia. Public Investment Bank has maintained its "Outperform" rating on AirAsia X, citing potential strategic advantages amidst the turbulence.
