Wall Street Ex-Trader Swaps Arbitrage for AirAsia Ambitions

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Aireen Omar
Aireen Omar, chief executive officer of AirAsia Bhd. Photographer: Charles Pertwee/Bloomberg

Aireen Omar juggled numbers as an arbitrage trader on Wall Street more than a decade ago. Now, as chief executive officer of Malaysia’s low-cost carrier AirAsia Bhd., her juggling act extends beyond figures.

She’s negotiated with airport authorities over a sinking tarmac in Kuala Lumpur, haggled with banks on aircraft financing, and overseen the addition of 24 routes to destinations including the Chinese city of Guangzhou and Kolkata in India since becoming CEO three years ago. Implementing the expansion plans of the airline’s co-founder and group CEO, Tony Fernandes, Aireen says she shares his vision of maintaining AirAsia’s position as the region’s biggest budget carrier and continuing to grow.

“I’m supposed to be able to carry out the ambition,” Aireen, 42, said in interviews in Kuala Lumpur. “I want AirAsia to be the airline that everybody wants to use when they travel to Asia.”

Aireen has her work cut out for her. Even before a December crash that killed 162 people flying AirAsia’s Indonesian joint venture, competition rendered it loss-making, forcing the group to rely on the profitability of the Malaysian business. A June report criticizing AirAsia group’s accounting caused the company’s stock to drop more than 42 percent since, bringing the decline to about 57 percent this year. And the expansion she’s presided over has loaded up debt, at the same time as cash from operations has been declining.

Bit Stretched

AirAsia has been “expanding aggressively, and it continues to do so,” said Alan Richardson, a Hong Kong-based money manager at Samsung Asset Management Ltd., who sold the stock in March. “The balance sheet is a bit stretched right now.”

AirAsia’s vision doesn’t come cheap. It has joint ventures in four countries in order to fly more frequently and cost-efficiently than carriers relying on code-share partners. Apart from Indonesia, the Philippine and Indian units are also unprofitable, with Thai AirAsia the only one that is. Plans call for adding Japan next year. The units plus Aireen report independently to Fernandes.

“They have to focus on turning around the Indonesia as well as the Philippine operations,” said Tan Kee Hoong, an analyst at AllianceDBS Research Sdn. in Kuala Lumpur. “If they don’t, it will continue to burn more cash, and this will be a burden on AirAsia’s balance sheet.”

Rare Woman

Aireen is one of 12 female CEOs among 248 global airlines, according to New York-based Skift, a travel and data marketer. None comes from North America.

She has a decidedly different style from her boss. Fernandes has taken to social media such Twitter to lambaste Malaysia Airports Holdings Bhd. over problems at Kuala Lumpur’s budget terminal, where pooling water and cracks are frustrating operations. Aireen has tried to engage the operator privately with a more diplomatic approach.

Still, her patience seems to be diminishing: Her criticism became more public last month, when AirAsia sent a letter demanding the airport operator pay for losses and damages.

A further plunge in the ringgit on Friday, the worst since 1998, exacerbated a 17-year low caused in part by a political scandal that engulfed Prime Minister Najib Razak. The weak currency hurts AirAsia by raising costs of dollar-denominated purchases such as oil, aircraft and spare parts.

Lower Demand

Malaysia’s airlines have suffered lower demand after Malaysian Airlines’ loss of two planes: MH370 vanished over the Indian Ocean in March last year; flight MH17 was shot down over Ukraine four months later. Following December’s Indonesia crash, AirAsia group suspended marketing in the first few months of this year and cut capacity there.

At the same time, passenger yields at the Malaysian business continued to decline in the face of strong competition, according to Bloomberg Intelligence.

The report by Hong Kong-based GMT Research that questioned AirAsia’s accounting dealt a further blow. Fernandes said the report created “mass hysteria” and that the company’s fundamentals remain strong.

GMT’s assessment is “incorrect,” Aireen said. To prove her conviction, she has personally purchased 50,000 AirAsia shares since June 12, an exchange filing shows.

“It’s to gain market confidence that the CEO herself is actually buying,” Aireen said. “The best thing that we can do is to keep engaging the analysts, the investors, brokers, the financial market, to keep engaging them and explain.”

Mohshin Aziz, an analyst at Malayan Banking Bhd. in Kuala Lumpur, said AirAsia stock was unfairly punished after the report and recommends buying it based on an improved outlook.

Growth Challenge

Yet slowing economic growth in Asia is also posing a challenge to airline expansion, according to Bloomberg Intelligence, which warned about Airbus Group SE’s exposure to a concentration of AirAsia orders in its backlog that might end up unfulfilled.

Negotiating plane purchases was what got Aireen into the business. She’d started as an equity arbitrage trader at Deutsche Bank AG in New York in 1997 and spent three years dealing in “pie-in-the-sky money,” which she said left her discontented.

Aireen moved home, switching careers to project finance. While at Bumiwerks Capital Management, a boutique investment firm, she met Kamarudin Meranun, AirAsia’s co-founder with Fernandes, who was seeking an executive to handle financing for Airbus jets.

“It sounded very exciting,” Aireen said. She joined as director of corporate finance in 2006 and was promoted to head the company six years later.

Women need to be confident that they can get any job done and not be held back by gender stereotyping, said Aireen, who cited cases of female cabin crew becoming pilots.

“I always enter into something without thinking that ‘Hey, I’m a woman, and how do I deal with this situation as a woman,’” she said.

AirAsia began as a government-backed startup and was bought in 2001 by Kamarudin and Fernandes. The group has since expanded to 203 planes, including those of AirAsia X Bhd., the group’s long-haul arm that flies to Australia and China.

“A lot of work still needs to be done,” Aireen said. “I would like for it to continue to be the leading low-cost airline in Asia. I would like it to be better than that, maybe the best in the world.”

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