AirAsia posts record loss of RM993m

The low-cost carrier posted its largest-ever net loss in 2Q20 versus a net profit of RM17.3m it made last year


AIRASIA Group Bhd said it has applied for bank loans in the countries it operates in, as concerns grow on the low-cost airline’s ability to remain afloat after being severely affected by the global Covid-19 pandemic.

The low-cost carrier yesterday posted its largest-ever net loss of RM992.89 million for the second quarter ended June 30, 2020 (2Q20), versus a net profit of RM17.34 million made last year.

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

“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 stated in a Bursa filing yesterday.

The airline also 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.

“Although we do not foresee capacity returning to pre-Covid-19 levels in the short term, we expect demand to gradually continue to grow throughout the second half of 2020 (2H20), and for the airline to be profitable in the years to come, as costs have reduced significantly amid our network optimisation and improved pricing strategies,” AirAsia CEO Tan Sri Dr Tony Fernandes said in a separate statement.

The group expects to have sufficient liquidity in 2H20 and 2021 as revenue should improve with rising domestic demand, he added.

“Our cashflow is managed tightly and we are well prepared to rely on operating domestic sectors in the short term, if international travel restrictions continue,” he said.

He said last month, the airline had received “indications from certain financial institutions” in support of its funding request, amounting to over RM1 billion.

The carrier temporarily hibernated most of its fleet at the end of the 1Q due to pandemic containment measures, before gradually resuming operations in end-May and early June as domestic travel restrictions eased.

It reported a loss of RM1.16 billion for the period, of which RM601 million were related to depreciation and interest on leases, RM198.5 million of realised loss on fuel hedges, and ineffective unrealised fuel hedge of RM23.9 million (which is offset against the gain recognised on realisation of forward contract of RM85.2 million).

Despite negotiating for deferrals with lessors, the group’s income statement charge of depreciation and interest were not adjusted, in accordance with the Covid 19 Related Rent Concessions (Amendment to MFRS16).

“Nonetheless, the main effect on cashflows would be the reduction in, or absence of, cash outflows for leases during the period of the rent concession,” it said.

Quarterly revenue plunged 96% to RM118.96 million from RM2.92 billion in 2Q19 due to pandemic-driven lockdowns and border closures. Some 42% of group revenue was contributed from cargo and logistics operations.

Cost-cutting measures implemented included manpower right-sizing, salary cuts, deferral negotiations with lessors, suppliers and partners, and restructuring of fuel hedging positions.

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

Shares of the low-cost carrier closed 0.7% or half a sen lower at 70.5 sen yesterday, valuing the company at RM2.36 billion.