AirAsia’s recovery hinges on border reopening plan

Low-cost carrier is struggling financially to remain afloat in the current pandemic-laden operating environment


THE aviation industry’s recovery will remain an uphill battle for AirAsia Group Bhd as countries continue to impose restriction policy to curb the spread of the Covid-19, said MIDF Amanah Investment Bank Bhd (MIDF Research). The research house said the reopening of border closures will determine AirAsia’s financial health this year.

“It remains an uphill battle for AirAsia given that it is struggling financially to remain afloat in the current pandemic-laden operating environment.

“The key risks to our call include faster than expected travel demand recovery, worsening pandemic, stricter movement control order imposed on air travels and a further round of equity fundraising,” it said in a report.

Aviation players will continue to see deepening losses if travel restrictions continue, said the research house.

“A partial upliftment is positive for the sector, but it is insufficient to carry the group to profitability.

“We also weigh in the return of consumer confidence. Even with the removal of travel restrictions, there will be a lagging effect between current low passenger traffic to full recovery.

“Therefore, reopening borders, or at least easing of travel restrictions is key for the return of air passengers,” it said.

However, MIDF Research said the possibility for the government to open Malaysia’s border in the near future is slim due to the indication that border restrictions would be lifted once the country completed its inoculation programme.

“The pertinent question is how much longer border controls and travel restrictions will be in place?

“If the government wants to hold off lifting the border, it certainly will dampen the recovery outlook for the sector.

“Given that the government targets 80% inoculation by December 2021, the 70% benchmark may only be feasible on the tail end of 2021,” it said. Due to the sentiment, the research house said there is a fair chance the industry will see similar or even lower passenger volumes than last year, potentially turning the year of recovery into another washout year.

MIDF Research is revising AirAsia’s net loss forecast for the financial year 2021 (FY21) and FY22 to RM1.98 billion and RM610 million from RM97 million and RM174.1 million respectively.

It said the revisions were made on the back of the net revenue forecast at RM3.27 billion and RM8.21 billion for the respective years .

Hong Leong Investment Bank Bhd analyst Daniel Wong in a research report yesterday said the ongoing vaccination programmes across Asia have provided some light to AirAsia’s grim outlook as many anticipated a strong recovery in travel demand in 2022.

AirAsia is banking on the initial stage of recovery to come from domestic air travel demand by end-2021 as vaccination gathers pace across Asean countries.

“However, we do not discount the potential risks of extended lockdown/movement control which may further dash hopes of air-travel demand recovery,” he added.

On a more positive note, the group’s digital platform (Teleport,, BigPay, Santan and BigRewards) continued to gain traction during this tough period. Among the new services were ride-hailing services, medical tourism package, food delivery, grocery delivery, etc.

The management has recently raised RM336 million through private placement and received a RM300 million loan from the Sabah state government. It is now seeking to raise RM800,000 million-RM1 billion through rights issue exercise and another RM1 billion from bank borrowings (underwritten by Danajamin Nasional Bhd).

“However, back of envelope calculation indicated the equity fundraising exercise will not be able to address its current negative equity position of -RM1.2 billion.

We have assumed AirAsia to raise shares (equity funding) by 20% in 2021,” said Wong.