Airline industry likely to recover by mid-2021

The group foresees sufficient liquidity in 2021 with the expectation of upward growth trajectory in air travel demand

by FARA AISYAH / pic by TMR FILE

AIRASIA Group Bhd expects the airline industry to recover by mid-2021 on formation of travel bubbles, green lanes and Covid-19 vaccines.

Its CEO Tan Sri Dr Tony Fernandes, in a statement yesterday, said the group foresees sufficient liquidity in 2021 with the expectation of upward growth trajectory in air travel demand amid the further formation of travel bubbles and green lanes.

“A number of Covid-19 vaccines are close to final stages of testing.

We have high hopes that with the availability and accessibility of effective vaccines, AirAsia will soon paint the skies red again,” Fernandes said.

He said the low-cost carrier’s key domestic markets have shown remarkable signs of recovery, especially in Thailand, which is running close to 100% of pre-Covid-19 domestic capacity.

He expects the slight setback in Malaysia due to the fresh wave of Covid-19 infections and travel restrictions to be short-lived and to bounce strongly in December.

“Despite expecting a capacity drop of 60% in 2020 due to minimum international operations, we are ready to rely purely on the strength of our domestic markets next year.

“Post-Covid-19, we expect the group airline business to be more profitable as we have established leaner optimised operations, removed loss-making routes and stations while concentrating on the most profitable and popular ones coupled with rational competition and the expectation of lower fuel unit cost in 2021,” Fernandes said.

The optimistic outlook comes as AirAsia’s posted a net loss of RM851.78 million in the third quarter ended Sept 30, 2020 (3Q20), versus a net loss of RM51.44 million a year ago for the same period, primarily due to a shortfall in revenue amid subdued travel demand as international borders remained closed.

A significant RM663 million of the loss was related to depreciation of right-of-use assets and lease interest costs.

In addition, the consolidated group was impacted by a fuel hedging loss of RM281 million and one-off impairment of receivables amounting to RM444 million, which was offset by a gain on disposal of RM394 million.

The group’s loss per share for the three months was also higher at 25.5 sen, compared to 1.5 sen in 3Q19.

Quarterly revenue plunged 85.67% year-on-year (YoY) to RM442.91 million from RM3.07 billion in 3Q19.

For the cumulative nine-month period (9M20), AirAsia recorded a net loss of RM2.66 billion versus a RM80.72 million net profit in 9M19.

Revenue for the January to September period fell 68.43% YoY to RM2.87 billion from RM9.09 billion in 9M19.

“We are also in the midst of securing commitments from the banks for the Danajamin Prihatin Guarantee Scheme in Malaysia and other bank financing in other markets.

“Other capital raising opportunities including a potential rights issue are in discussion and actively being explored,” Fernandes said.

In a separate exchange filing yesterday, AirAsia stated it had provided financial assistance worth RM20.5 million in the form of advances to AirAsia Japan Co Ltd, PT Indonesia AirAsia and Big Pay Pte Ltd during the quarter under review.