AirAsia can recover from flight's disappearance: Experts

Air Asia
Source: Jyi1693 | Wikipedia
Air Asia

The disappearance of AirAsia flight QZ8501 is unlikely to dent long-term demand for the airline's cheap fares, aviation experts told CNBC.

"It's not Armageddon. There will undoubtedly be short-term apprehension in demand, but air travel will bounce back, just like it does from terrorism attacks," said ‎K Ajith, director of Asia transport at UOB Kay Hian on Monday.

CIMB echoed that view, saying demand for AirAsia operations in Indonesia, Thailand and Malaysia will likely only see a sharp fall in the following three months. "Unless there is a second incident in the very near future, the AirAsia group's strong safety track record and very attractive commercial offerings may help limit the contagion and ensure a speedier demand recovery," the bank said in a note on Monday.

A representative at the Air Asia sales counter at Singapore's Changi Airport told CNBC on Sunday that there had not been mass cancellations following the news and that people were going ahead with their trips.

Read MoreSearch for missing AirAsia plane resumes

The Indonesian transportation minister has stated that the government will be reviewing the airline's Indonesian operations.

Flight QZ8501 vanished from radar screens early on Sunday local time after departing from Surabaya, Indonesia's second-largest city. The Airbus A320-200 aircraft was operated by Indonesia AirAsia, 49 percent owned by Malaysian low-cost carrier (LCC) Air Asia.

The group, which has subsidiaries across Southeast Asia, is one of the region's most popular budget carriers due to its year-round low-cost fares, but Sunday's tragedy is set to be a test of leadership for CEO Tony Fernandes, who enjoys celebrity-like status in the region and is often compared with eccentric Virgin boss Richard Branson.

"The pace of AirAsia's recovery will depend in large part on (1) how quickly the plane is found, i.e. whether there is closure, (2) the quality of AirAsia's public relations and engagement efforts, and (3) public perception on the cause of the accident, i.e. due to bad weather or pilot error," CIMB said. "Of less concern are the costs related to claims and salvage, which should be adequately covered by insurance."

Calculations by the bank suggest that a 1 percent decline in the airline's Indonesian, Malaysian and Thai 2015 passenger traffic will result in a 13 percent reduction to 2015 net profit.

A look at AirAsia's safety history

Flight QZ8501 marked the first significant incident to scar AirAsia's safety history since operations first began in 2002. Following news that the missing plane belonged to a budget airline, experts immediately questioned the safety record of those carriers, compared with premium airline companies.

Read MoreMissing AirAsia plane: Indonesia's search so far

"When it comes to pilot training, everything is guided by international rules and regulations, so there is no difference between pilots operating on LCC carriers or legacy carriers. It all depends on the incident: how much experience the pilot has, and how he's going to react to the technical glitch," Subhranshu Sekhar Das, head of aerospace, defense & security practice, Asia-Pacific, at Frost and Sullivan, told CNBC.

The two pilots operating flight QZ8501 were Captain Iriyanto, an Indonesian national, and French first officer Remi Emmanual Plesel. Both of them had logged more than 8,000 hours of flying time combined.

CIMB points out that Indonesia AirAsia's excellent safety track record should be a key advantage for the company. Some other carriers in the country have had a spotty history, with the European Union only allowing five of Indonesia's airlines to fly there: Garuda Indonesia, Airfast Indonesia, Mandala Airlines, Ekspres Transportasi Antarbenua and Indonesia Air Asia.

As experts try to pinpoint the cause of the plane's disappearance, weather-related claims have been a key topic of discussion as there were thunderstorms along the flight route.

"I would be very interested to know what simulator training the AirAsia and Airbus pilots get in their approach to high altitude stall recovery, both low speed and high speed stalls. In my 35 years of flying, I only encountered a couple of severe turbulence instances and the training I got stood very solidly for me," said Peter Reiss, former security consultant to the International Civil Aviation Organization.

"We never knowingly fly into thunderstorms. My guess is that these pilots believed that too, so I suspect they were taken by surprise if weather was indeed the causation of this accident," he added.

The company's shares opened down 12 percent on Monday, and ‎K Ajith of UOB Kay Hian expects the stock to drop as much as 15 percent on the day. CIMB recommends investors view this sharp decline as a good opportunity to accumulate into the airline, with liquidation value of RM 2.40 as support.