AirAsia X dented by Covid-19, border closures

The only way for AirAsia X to survive is to wait for international borders to reopen, says analyst


AIRASIA X Bhd’s fortunes look clouded by the sustained spread of Covid-19 and cross-border movement restrictions, which discourage shareholders and bankers backing a rescue plan for the troubled carrier.

Independent aviation analyst Mohsin Aziz said the only way for AirAsia X to survive is to wait for international borders to reopen before the government or its shareholders may consider injecting some financial assistance.

“There is no point if the international borders remain close,” he said.

AirAsia X shares held up quite well, closing at 5.5 sen yesterday, despite concerns over its ability to remain as a going concern due to its dire financial health.

The share is above its all-time low of four sen hit during the stock market crash of March 19.

The long-haul carrier recorded a net loss of RM549.7 million for the first quarter ended March 31, 2020 (1Q20) against a net profit of RM43.33 million a year earlier.

Revenue fell by 20.94% year-on-year to RM924.09 million for the period.

Aviation advisory firm Endau Analytics Sdn Bhd founder and analyst Shukor Yusof said AirAsia X is in terrible shape and weakening by the day. He said its low-cost, long-haul is a tough business model.

“Even if AirAsia X were to exit the scene, it won’t benefit carriers like Malaysia Airlines Bhd as the national carrier’s problems are mostly self-inflicted and worse than AirAsia X,” he explained.

Shukor added that there are three airline groups in Malaysia, which has just over 30 million population, and there’s clearly an overcapacity in the market.

Mohsin said AirAsia Group Bhd should try to coordinate its operations with carriers like Malaysia Airlines to avoid flying with empty seats amid the uncertainty now.

However, this may be illegal due to Anti-Competitive Act, but it is not impossible, he added.

“Perhaps, the government needs to give a waiver of or nullify the Act for some period in order to make this happen as what’s happening in this industry right now is not normal. Extraordinary circumstances need extraordinary measure,” he told The Malaysian Reserve.

Mohsin believed coordination would help airlines shoulder their rising financial burden better.

The Covid-19 pandemic has sparked an economic “crisis like no other” with even the best airlines suffering. Singapore Airlines Ltd last week reported a 1Q net loss of more than US$800 million (RM3.4 billion), Mohsin said.

As most countries still have border closures and travel bans in place due to Covid-19, airlines remain heavily dependent on the domestic market and cargo business, said Mohsin.

Shukor, however, has a different view. “Competition is good for airlines but not collusion, which will impoverish passengers. The idea of a coordination may be good for airlines but bad for consumers. It’s a zero sum game.

“AirAsia is recognised globally and has a good chance of overcoming Covid-19 if it quickly gets a cash infusion and other forms of financial support,” he said.