There is a latent demand for travel, thus border reopening in Asia likely a determining factor in air travel recovery
By RAHIMI YUNUS / Pic By MUHD AMIN NAHARUL
AIRASIA Group Bhd may see air travels returning to pre-Covid-19 levels in six to 12 months if international borders are reopen, analysts said.
Pangolin Investment Management Pte Ltd director Mohshin Aziz said there is a latent demand for travel, and border reopening after Covid-19 shutdowns in Asia would be a determining factor in air travel recovery.
“There is a lot of latent demand, but the only question is on governments easing the travel restrictions and quarantine requirements. This requires a multiple of agreements between governments, and the situation is still very dynamic and unpredictable,” Mohshin told The Malaysian Reserve.
AirAsia’s share price rose briefly on Wednesday, following a positive outlook provided by AirAsia CEO Tan Sri Dr Tony Fernandes.
Over 204 million shares were traded which gave the group a market value of RM2.92 billion.
In a Bloomberg interview, Fernandes said AirAsia is “quietly optimistic” for 2021 with a focus on Asean.
He said air travel will return to pre-Covid-19 levels in six to 12 months, while Thailand’s domestic market is already back to pre- Covid-19 levels and will be ahead of it by the end of December.
He expects airfares to remain largely unchanged from pre-Covid time.
Fernandes also said the company is evaluating its AirAsia (India) Ltd venture with Tata Group, while also eyeing expanding their relationship in the digital business.
Meanwhile, The Economic Times (ET) reported that Tata will stop dues payment by AirAsia India to AirAsia if the latter does not provide funding to their low-cost airline joint venture (JV) before Dec 31, 2020.
The report said, citing sources, Tata will also start deducting the dues and setting them off against equity shares in AirAsia India if its JV partner, AirAsia, is unable to bring in funds by subscribing to a rights offer of at least 300 crore rupee (RM165.7 million).
“AirAsia India, a 51:49 JV where Tata is the controlling shareholder, owes AirAsia 489 crore rupee as per its latest available financial statements.
“Tata infused 300 crore rupee into the budget carrier (AirAsia India) in July to keep it flying amid the Covid-19 outbreak that resulted in a two-month ban on flying from March 24. The new clauses were incorporated in the shareholder agreement at that point,” ET reported according to people aware of the matter.
Mohshin said, even before Covid-19, AirAsia India was losing money, not able to scale and facing very fierce competition with local carriers.
“The reality is everybody is tight with capital, and AirAsia is losing on capital on a quarterly basis. They have no money in Malaysia, how would they want to give money to other ventures abroad?” he said.
Regardless, he said both parties must play by rules and regulations, and any fresh equity raise or rights issue must be done equitably.