AirAsia looks past Q2 losses


  • Aviation
  • Wednesday, 26 Aug 2020

“Furthermore, we are working with our creditors on repayment plans, ” said AirAsia Group CEO Tan Sri Tony Fernandes (pic) in a statement.

PETALING JAYA: AirAsia Group Bhd, which was badly hit by the coronavirus (Covid-19) pandemic, says it has sufficient cash flow to maintain operations for the rest of the year and 2021 in tandem with rising domestic demand.

The low-cost carrier, which restarted its domestic flights in late April, said the number of passengers picked up in June, including the tripling of the number of passengers carried by AirAsia Malaysia, the doubling of the number of passengers carried by AirAsia Thailand, and an increase of 10% in load factor.

While AirAsia India achieved six times the number of passengers carried, reflecting the strong rebound demand for air travel, it believes the group has set the right foundation for the second quarter of 2020, as the airline heads into the second half of the year with continued understanding of its customers and support from lessors, hedge counterparties and business partners.

“Furthermore, we are working with our creditors on repayment plans, ” said AirAsia Group CEO Tan Sri Tony Fernandes in a statement.

For the second quarter, AirAsia reported almost a billion ringgit in losses, reflecting the collapse in airline passengers as the Covid-19 pandemic wiped out demand amid widespread travel restrictions.

For the second quarter ended June 30, the low-cost carrier posted losses of RM992.89mil compared with a profit of RM17.34mil a year ago.

The airline slashed its capacity by 98% during the quarter after bookings dried up, sending revenue down by more than RM2bil or 96% to RM118.96mil from RM2.92bil previously due to the impact of hibernation of flights and travel restrictions caused by the Covid 19 pandemic.

Its traffic, measured by revenue per passenger per kilometer, in the three months through June sank 99%.

In a filing with Bursa Malaysia, AirAsia said it recorded negative earnings before interest, taxes, depreciation, and amortisation (EBITDA) of RM637.3mil for the second quarter compared to a positive EBITDA of RM217.8mil in the same quarter last year as the reduction in group expenditure could not offset the drop in revenue as passenger demand collapsed.

The group also recorded realised fuel swap losses of RM198.5mil for the quarter on the back of a reduction in fuel consumption and drastic fall in oil prices.

“AirAsia Group has been severely affected by the global Covid-19 pandemic. AirAsia temporarily hibernated most of its fleet across the network in late March 2020 due to increasing movement restrictions and only slowly easing up with domestic travel in late May or early June.

“We are guided by the government and health authorities of various countries in adding our frequencies and opening routes.

“AirAsia is looking forward to the gradual reopening of international borders in recognition that air transport provides the connectivity that is essential for the resumption of economic activities, ” it said.

As part of its efforts to raise cash, the airline said it has been in discussions 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.

“We have also been presented with proposals to raise capital to strengthen our equity base and/or liquidity from a number of investment bankers, lenders as well as potential investors to help the company weather the storm caused by the Covid-19 pandemic, ” it said.

It is noteworthy that AirAsia resumed its domestic flights on April 29 and recently started flying between Kuala Lumpur and Singapore. The number of available seats remains a fraction of pre-pandemic levels and will likely stay that way for a while.

AirAsia is also working to shore up its cash flow for it to go through the current turbulence. It said the group has applied for bank loans in its operating countries.

“In Malaysia, we are securing commitments from the banks for the government guarantee loan under the Danajamin Prihatin Guarantee Scheme while our entities in the Philippines and Indonesia are currently in various stages of bank loan applications, ” it said.

Earlier this month, StarBiz reported that AirAsia has secured a financing package of RM1bil that it can withdraw over time, put together by a consortium of local banks, according to industry sources.

“Barring any reversal of flight resumption plans and any major shock to demand, we foresee that we have sufficient working capital to sustain the operations, ” AirAsia said.

Cumulatively, for the first half of 2020, AirAsia posted losses of RM1.80bil from a profit of RM111.78mil a year ago. Revenue for the period fell 58% to RM2.43bil compared to RM5.65bil previously. AirAsia shares closed slightly lower at 70 sen yesterday.

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