PETALING JAYA: AirAsia Group Bhd needs about RM3bil in new funding and is said to have applied for bank loans in its respective operating countries to shore up liquidity.
It has a lid on costs and is also in talks with various parties for investment into its businesses, analysts said.
“We estimate AirAsia needs RM3bil in new funding to maintain a healthy cash position, ’’ said CGS-CIMB Equities Research in a report.
The group is negotiating with banks for new unsecured debt, of which 80% may be guaranteed by Danajamin, and may issue new equity or convertible securities to strategic shareholders while not ruling out a rights issue, it added.
Affin Hwang Capital Research added that AirAsia management has guided a possible equity raising (placement and/or rights issue).
Kenanga Research said AirAsia has ongoing deliberations with a number of parties for joint -ventures and collaborations that may result in additional third-party investments in specific segments of the group’s business.
AirAsia also targeted to reduce operational expenditure by 30% this year and has reduced cash costs by cutting salaries and headcount, securing a three-month deferral of operating lease and maintenance payments and renegotiating costs with other suppliers, said CGS CIMB.
As at end-March, AirAsia has RM1.6bil in cash.
“Through a combination of debt and equity financing, it (AirAsia) expects to outlive the Covid-19 pandemic, ’’ said Maybank IB Research.
AirAsia reported its largest quarterly net loss since its 2004 listing of RM803.85mil for first quarter financial year 2020 (FY20) against a net profit of RM96.09mil a year earlier. Its core net loss was RM1.1bil versus RM150mil net profit a year ago.
The loss was dragged by a multiple factors including lower demand and load factors due to the pandemic, lockdowns, wrong hedge against crude oil prices which collapsed in March, and hefty depreciation.
The group also performed more “C” checks on its aircraft in the first quarter, leading to higher maintenance costs, though the only positive was an increase in passenger yields across some units, said CGS-CIMB Research.
AirAsia has since restructured a major portion (70%) of its fuel hedging contracts.
Most analysts expect losses to peak in the second quarter.
“From the peak of losses in the second quarter, losses may sequentially narrow in the third quarter as domestic capacity is restored across the various group airlines by late-July or August but there is no sign yet that international flights can resume meaningfully, ’’ said CGS CIMB.
Most houses have lowered their earnings forecast for FY20-FY21 and lowered their 12-month target price, given the difficult market conditions due to the pandemic.