Analyst: Indonesia AirAsia IPO Plan to Test Market Receptiveness

TEMPO.CO, Jakarta - AirAsia Group's Chief Executive Officer (CEO), Tony Fernandes repeated announcement of his plan to commence an initial public offering (IPO) of Indonesia AirAsia has been considered by analysts as a test to gauge the response of Indonesian investors - especially since AirAsia Indonesia has yet to release its' proposed IPO target and business proposal regarding the matter.

"[Fernandes] nor AirAsia Indonesia has yet to release any further concrete information on the issue. As such, analysts believe that this is a test of market confidence - which is necessary considering what recently happened in December 2014, when AirAsia flight QZ8501 crashed in the Karimata Strait," said an analyst for First Asia Capital, David Sutyanto to Tempo on Friday last week.

According to David, it is rather hard to estimate the right momentum for Indonesia AirAsia to begin offering their stocks at the Indonesian Stock Exchange (IDX), because an IPO's success is usually determined by the financial performance of the company in question. With the Rupiah's continued depreciation - which had breached its' psychological threshold of Rp 13,000 per US Dollar - Indonesia AirAsia's would face a hard time to keep its' financial performance in the green. "Although jet fuel prices have declined in the past few months, the majority of the company's other transactions are still done in Rupiah," he said.

Last week, Air Asia Group's CEO Tony Fernandes announced that AirAsia's parent company will continued to proceed with the IPO of its' Indonesian operations, before adding that the decision is being mulled as a part of its' effort to increase the transparency of the entire group's financial management.

That said, Fernandes stopped short of detailing the technical details nor the exact date of the planned IPO.

An analyst for Investa Saran Mandiri, Kiswoyo Adi Joe, said that the QZ8501 incident will not cause significant concerns among investors, because Indonesia AirAsia’s crisis management process is deemed by many as quite effective in alleviating fears among the general public. "I believe that the IPO plan will be well received by the general public, and it will beneficial to the growth of healthy competition in the aviation industry," he said.

The CEO for Indonesia AirAsia, Sunu Widyatmoko, had previously said that the IPO would not begin in the near future, because Indonesia's macroeconomic conditions is currently not conducive for such action to be taken.

It is also known that Citilink Indonesia - a low-cost subsidiary of Indonesia's flag carrier Garuda Indonesia - and Lion Mentari Airlines, have postponed their IPO plans until next year.

DINI PRAMITA