Jumaat, 27 Disember 2013

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The Star Online: Business

Good year ahead for aviation?

Posted: 27 Dec 2013 08:00 AM PST

THE rapidly-expanding aviation sector is expected to remain challenging and competitive in 2014. Nevertheless, industry players and analysts are of the opinion that the outlook will be "positive" next year.

According to industry players, the opening of KLIA2, which has been delayed numerous times, promises an interesting development as it is expected to boost air traffic. At the same time, all eyes will also be on Malaysia Airlines (MAS) turnaround story.

AirAsia group chief executive officer Tan Sri Tony Fernandes says 2014 would be a big year for the AirAsia group and it would be introducing new duty-free business like a mall in the sky to boost its ancillary income.

He adds that the outlook seems positive for the industry while competition would be more rational next year.

He says there was rising demand for air travel as well as positive economic growth.

"I think if competition is rational, which I believe it will be, the industry's outlook will be positive. I think 2014 has huge benefits for Malaysia because of AirAsia X's growth," he says.

Fernandes says the opening of KLIA2 will give the industry a massive boost.

"As long as we keep fares low, people will fly. There are 3 billion people in Asia," he adds.

To reflect the optimism of the aviation industry, the International Air Transport Association (IATA) recently revised its industry outlook upwards for the coming year. It is now predicting that airlines will collectively post a global net profit of US$12.9bil in 2013, surging to US$19.7bil in 2014.

IATA's projected profit of US$19.7bil for 2014 is a new record for airlines. The upward revision is due to lower jet fuel prices over the forecast period as well as improvements to the industry's structure and efficiency already visible in quarterly results this year. Passenger markets continue to outperform the cargo business which remains stagnant both on volumes and revenues.

Industry net profit margins, however, remain weak at 1.1% of revenues in 2012, 1.8% in 2013 and 2.6% in 2014. Within this aggregate forecast for the entire industry, performance of individual airlines and regions will vary considerably.

Asia-Pacific airlines are expected to post a US$4.1bil profit in 2014, up from US$3.2bil in 2013.

"Overall, the industry's fortunes are moving in the right direction. Jet fuel prices remain high, but below their 2012 peak. Passenger demand is expanding in the 5%-6% range – in line with historical trend. Efficiencies gained through mergers and joint ventures are delivering value to both passengers and shareholders. And product innovations are growing ancillary revenues," according to IATA director-general and CEO Tony Tyler.

MAS group CEO Ahmad Jauhari Yahya says "2013 was an exciting year for us at MAS. New routes to Dubai, Kochi and Darwin were introduced as we look to improve our network reach. We also deployed our flagship A380 aircraft to the Paris and Hong Kong routes. We expect 2014 to also be a year of more exciting projects.''

He adds that "we are constantly monitoring markets and various destinations around the world and exploring their economic viability''.

Malindo Air CEO Chandran Rama Muthy says the airline's performance the past 10 months has been good and he expects the trend to continue to 2014. Malindo Air will continue pursuing significant domestic and international expansion to capture a greater share of the regional market.''

He adds that the airline has 11 aircraft this year and will increase to 25 next year.

''We will continue pursuing international expansion, sticking to our long-term plans of turning the under-used KLIA into our main transit hub, thus easing the congested Singapore and Bangkok airports. With the launch of our Indian market in the beginning of the year, we are poised to capture a bigger market share. However, we will focus on a good foothold in the South-East Asian market. Domestically, we are now providing more than 60,000 weekly seats, and with more aircraft next year, we are projecting an increase of 60,000 seats,'' Chandran adds.

Meanwhile, analysts expect competition in the industry to continue to be intense and not restricted to local airlines.

They note that full-service airlines and low cost carriers are expanding their fleet and seat capacity, making South-East Asia one of the fastest growing aviation markets in the world. Carriers across the region are aggressively expanding their network and capacity ahead of the full implementation of the Asean Open Sky policy in 2015.

AirAsia X Bhd, which was listed on Bursa Malaysia in July, has ordered 25 more A330-300s valued at US$6bil (RM19.55bil). Another notable order of aircraft for 2013 would be Emirates' purchase of an additional 50 Airbus A380 superjumbos valued at US$20bil, confirming the continued strong demand for air travel.

RHB Research says competition in 2014 will persist, but will be less severe as Malindo Air opts to take a more conservative expansion strategy, which bodes well for AirAsia and MAS.

"We see value in the former and AirAsia X as their valuations are relatively cheap compared to their regional and global peers," it says.

RHB Research maintains its overweight call on the sector, citing the Visit Malaysia Year 2014 campaign and KLIA2 as the theme for higher passenger arrivals.

"The year 2014 is expected to remain competitive as Malindo continues to spread its wings. However, we think Malindo Air will be less aggressive due to its high cost structure.

Its airfare discounts have narrowed while there have been capacity cutbacks on some routes. Furthermore, fleet delivery so far (it currently has six narrow-bodied aircraft) has been below its initial target of 12 aircraft."

RHB Research says "2013 has been a challenging year for Malaysian carriers" as they embarked on aggressive capacity expansion to boost topline and achieve economies of scale amid heightening competition driven by Malindo Air's debut. This resulted in yields coming under pressure for MAS and AirAsia, dropping by 12.7% and 5.3% year-to-date respectively.

The entry of Lion Air group's Malindo Air this year has proven to be impactful in the MAS-AirAsia duopoly domestic air travel market as both airlines have seen their yields affected by the new carrier.

AirAsia executive chairman Datuk Kamarudin Meranun says its yield has been slightly affected due to the intense competition and that it will be coming back with more promotions, cost reductions and new ancillary income streams to defend its turf.

RHB Research says AirAsia's low-cost model has enabled it to stand strong despite intensifying competition amid a cost-conscious culture.

It says Malaysia Airports Holdings Bhd (MAHB) benefits the most from rising passenger demand as low air fares stimulate air travel. The airport operator reported a 17.3% jump in year-to-date passenger numbers in October, driven by strong growth in both the domestic and international segments.

There's a new carrier, Flying Fox Airways, an Ipoh-based airline which aims to increase the accessibility of Ipoh.

Flying Fox was supposed to commence operation on Dec 13 but got grounded on the day itself as the Ipoh airport runway was not ready for their aircraft.

Flying Fox complained that it had to cancel all its Ipoh-Medan flights between Dec 13 and June next year because the airport was unable to accommodate the Boeing 737-400 and Airbus A320.

On the opening of KLIA2, there have been reports suggesting that the contractors may not meet the scheduled completion to commence operations in April 2014.

MAHB has also expressed concern over the slippage in the work schedule of the terminal building, which is being built by the UEMC-Binapuri joint venture.

Nevertheless, UEM Construction Sdn Bhd and Bina Puri Sdn Bhd, the main contractors of the new low-cost terminal, have reaffirmed their commitment to complete work on the project within the stipulated deadline of Jan 31, 2014.

World Cup to help boost ad spending

Posted: 27 Dec 2013 08:00 AM PST

A CAUTIOUS, albeit optimistic, stance is being forecast for the local advertising industry next year, with growth expected to be in the single-digit range.

With higher electricity tariffs effective Jan 1 and the inevitable gradual reduction in fuel subsidies, rising inflation is expected to keep advertising expenditure (adex) in check.

"With rising inflation, a lot of advertisers will be cautious about how they spend their money in 2014," says Malaysian Advertisers Association (MAA) president Khoo Kar Khoon.

"Whatever spend has to generate revenue, and with a variety of options (digital and traditional advertising), advertisers will be cautious on how they part with their money," he adds.

Khoo reckons adex will grow no more than 5% in 2014.

Industry observers believe that the bonus for next year will be the World Cup, which is expected to boost adex. Khoo feels that the global football tournament, which is held once every four years, will be the saving grace.

"I think if you take away the World Cup, adex will likely be flat in 2014," he says.

According to market research firm Nielsen, adex for the first 11 months of this year grew 3.2% if pay TV is excluded (the number of pay TV channels monitored has increased significantly since 2012) and 20.2% when pay TV is included.

Including pay TV, total adex hit RM12.2bil up to November. Local government institutions was the top category by spending, showing an 89.6% jump in adex. The top three advertisers by spending were Unilever, Nestle and the Prime Minister's Department.

Khoo, who is also Nestle Malaysia communications director, feels one of the major challenges facing the advertising industry next year is the variety of options that will be available and advertisers will need to figure out how best to part with their money.

"With so many options, advertisers will need to know which is the most viable option that can yield the best returns," he says.

Most industry observers agree that the World Cup will help boost ad spend.

"Like the Olympics, it's a major sporting event that happens only once in four years, and TV stations and beverage players will likely be ramping up spending to capitalise on this," says Association of Accredited Advertising Agents Malaysia (4As) president Datuk Johnny Mun.

Omnicom Media Group Malaysia (OMG) managing director Andreas Vogiatzakis says the World Cup and the fact that 2014 is Visit Malaysia Year (VMY), will help spur ad spend.

"We (OMG) also expect to see further spending from the big technology players on launches of new devices and gadgets.

"However, we don't forecast 2014's spend to be very high, but foresee more of a stabilisation in adex. With the World Cup, we expect more tactical drive and spend, but not massive investment," he says.

Carat Malaysia chief executive officer Bala Pomaleh concurs, explaining that the last few World Cups did not boost ad spend as much as they had previously.

"It would depend whether it is broadcast also on digital media like YouTube," he says, adding that VMY spending would mainly go abroad so adex may not be much impacted locally.

On the global front, ad agency ZenithOptimedia has forecast ad spend to grow 5.3% in 2014, underpinned by events such as the World Cup, Winter Olympics and improving economic conditions.

It predicts mobile technology will contribute 36% of the extra ad spend between 2013 and 2016.

Apple CEO's 2013 total pay same as last year's US$4.25mil

Posted: 27 Dec 2013 06:59 PM PST

SAN FRANCISCO: Apple Inc CEO Tim Cook earned roughly the same in 2013 as in 2012, but lost part of his performance-based stock award during a year in which intense competition and margin pressure bludgeoned the iPhone maker's stock.

Cook took home $4.25 million, including a base salary of $1.4 million and a performance bonus of $2.8 million, roughly on par with 2012, the company said in a preliminary proxy statement on Friday.

But he gave up about 7,100 shares tied to an annual performance-dependent award, based on shareholder returns from August 24 of 2012 to August 25, 2013. Apple's stock lost a quarter of its value over that one-year period.

The company also advised shareholders to vote down a resolution by activist investor Carl Icahn, who proposed the iPhone maker buy back $50 billion worth of shares in fiscal 2014. It was the first time the company had publicly voiced its response to Icahn's demands.

Apple argued on Friday it has already returned $43 billion in dividends and share repurchases over the first six months of its roughly $100 billion capital return program.

The "dynamic competitive landscape and the company's rapid pace of innovation require unprecedented investment, flexibility and access to resources," Apple said in advising shareholders to reject Icahn's proposal.

Known for decades of strong-arm tactics, including proxy fights, Icahn has repeatedly made it clear that his proposal is not a sign that he stands against Apple's management. The billionaire has discussed the issue with Cook in past months, arguing via tweets that a buyback of as much as $150 billion is within the company's means and would prop up its stock.


Since taking over from the late Steve Jobs, Cook has steered Apple in a more investor-friendly direction, including the establishment of one of the industry's biggest capital return programs.

Apple's board in 2012 granted Cook an award of one million restricted stock units (RSUs) - one of the largest pay packages for an executive in a decade, intended to signal its confidence in Cook in the wake of the late Steve Jobs.

The award vests annually, but part of the grant depends on shareholder returns versus a basket of Apple's corporate peers, including Cisco Systems Inc <CSCO.O> and Google Inc <GOOG.O>.

But Apple has come under increasing strain from rivals like Samsung Electronics <005930.KS> andHuawei <HWT.UL> in key markets, while Amazon.com Inc <AMZN.O> and other manufacturers are using Google's Android software to launch competing tablets.

Apple's profit and margins slid in the September quarter despite selling 33.8 million iPhones. Sources have said demand for the $100 cheaper, brightly hued iPhone 5C has severely lagged sales for the top-tier 5S, spurring concerns about the iPhone's market positioning and its ability to compete with a growing profusion of lower-cost rivals.

This month, it finally secured a deal with China Mobile <0941.HK> after protracted negotiations, a deal that should enlarge its footprint in the world's largest telecoms market.- Reuters

Kredit: www.thestar.com.my

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