AirAsia posts RM804m net loss in 1Q20

The group has applied for bank loans in its operating countries to shore up its liquidity, says group CEO


AIRASIA Group Bhd stated weak demand for air travel and border controls, losses on derivative contracts, and depreciation and lease liabilities as the causes of its financial misfortune in the first quarter ended March 31, 2020 (1Q20).

The budget carrier posted a net loss of RM803.85 million or loss per share of 24.1 sen for the quarter compared to a net profit of RM96.09 million or earnings per share of 2.9 sen it made for the same period last year.

Like many carriers across the world, AirAsia is looking for financial support as it resumes operations.

AirAsia group CEO Tan Sri Dr Tony Fernandes said the group has applied for bank loans in its operating countries to shore up its liquidity.

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

“In addition, AirAsia has ongoing deliberations with a number of parties for joint ventures and collaborations that may result in additional investments in specific segments of the group’s businesses,” he said in a statement yesterday.

Finance Minister Tengku Zafrul Tengku Abdul Aziz recently stated in an interview that the government was not considering providing direct financial assistance to aviation companies in the country at present and advised companies to exhaust all other means.

The bulk of AirAsia’s losses in the quarter were due to it recording RM270.1 million of fair value losses on derivatives and RM110 million in loss settlement on fuel hedges gone wrong.

The company also provided for RM243 million in additional depreciation and lease liabilities interest on operating lease aircraft in the period which included the additional sales and leaseback transactions completed in August 2019.

The spread of Covid-19 pandemic, travel restrictions and border controls announced by various governments led to a collapse in demand for air travel in February and March 2020 with total passengers carried by AirAsia for the period falling 22% year-on-year (YoY) to 9.85 million.

AirAsia’s quarterly revenue declined 15.38% YoY to RM2.31 billion as the carrier reduced available seat kilometre (ASK) by 19% primarily due to proactive capacity management to mitigate the impact.

Its ancillary revenue fell by 16% YoY to RM556 million, dragged by airline ancillary which declined by 28% mainly due to the removal of processing fees and a 22% reduction of passengers carried. Non-airline ancillary revenue grew 27% YoY.

“Since beginning domestic operations in late April, we are encouraged by the increase in load factors week by week. Competition has also remained rational,” AirAsia president for airlines Bo Lingam said in a statement.

“We are aiming to increase our flight frequencies to around 50% of our pre-Covid operations and we look forward to resuming all domestic routes in the coming weeks and months to cater to the increasing demand,” he added.

Currently, AirAsia is operating 191 daily flights across the region.

Apart from the airline business, Fernandes said AirAsia has a strong and growing digital pillar which brings together all its digital businesses under RedBeat Ventures Sdn Bhd (RBV).

RBV is positioned to be an Asean triple play business covering e-commerce, logistics and finance, leveraging its extensive reach on and its low customer acquisition cost.

AirAsia shares closed at 89.5 sen yesterday, valuing the company at RM2.99 billion.