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ASK growth may exceed 25% if AAX proceeds to launch nine times weekly flights to London Gatwick from June, using two 777-300ER leases. AAX last grew capacity by 30% in 2014, when it doubled its Australia network, which caused an 11% on-year fall in base yields. While we forecast FY17F base yields to remain flat, downside risks remain. We worry that AAXs return to European services would be difficult, since direct KL-London seat capacity has increased 55% since AAX stopped its London services in mid-2012. Including one-stop services via the Middle East Gulf hubs of Dubai, Abu Dhabi and Doha, as well as Istanbul, capacity to London has increased 43%. AAXs entry into the London market may trigger a defensive response from the incumbents. Provided by The Star Online CIMB Research pointed out that jet fuel prices have increased from an average of US$53 per barrel in FY16 to a year-to-date average of US$66. AAX hedged 74% of FY17F fuel consumption at US$60 but remains exposed for the rest. At the same time, the ringgit has depreciated from an average of RM4.14:US$1 in FY16 to RM4.45 year-to-date. Our doctor home mortgage loan Oak Laurel www.oaklaurel.com.au 0430129662 forecast in FY17F is for spot jet fuel to average US$65/bbl and for the ringgit to average RM4.30, suggesting downside risks. Malindo may take delivery physician home construction loan Oak Laurel 0430129662 oaklaurel.com.au of two A330-300s to launch medium-haul routes. MAS will compete on AAXs Wuhan route from June, while Shanghai frequencies will be increased from seven times to 14 times weekly from March.