AirAsia posts record loss as virus annihilates demand

AirAsia Group Bhd. posted its largest quarterly loss on record as restrictions imposed by governments to contain the spread of the coronavirus decimated travel.

Southeast Asia’s second-biggest budget carrier by market value reported a net loss of 992.9 million ringgit ($238 million) in the three months ended June 30 versus net income of 17.3 million ringgit a year ago, according to an exchange filing Tuesday. Sales plunged 96% to just 119 million ringgit.

Chief Executive Officer Tony Fernandes has been in talks for joint ventures and collaborations that may result in additional investment for the beleaguered airline. Bank loans and other capital-raising proposals are also being weighed.

“During the lockdown, we took the opportunity to restructure the group and lay the foundations for a sustainable and viable business for the future,” Fernandes said in a statement Tuesday. “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 and for the airline to be profitable in the years to come.”

Airlines globally have grounded thousands of planes as countries shut borders and restricted people’s movements. According to the International Air Transport Association, the industry likely won’t recover to pre-pandemic levels until 2024.

Some signs of a recovery are at least emerging for regional aviation, with Singapore and Malaysia agreeing to form travel bubbles to allow people to move between the two countries. AirAsia, which is based in Malaysia, resumed flights in the domestic market in late April after suspending them for a month.

AirAsia said in an earlier statement Tuesday that it had “applied for bank loans in our operating countries to shore up our liquidity.” “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’s auditor Ernst & Young said last month that the carrier’s ability to continue as a going concern may be in “significant doubt” because its current liabilities exceeded its current assets at the end of 2019 even before the pandemic. It also sounded a warning on AirAsia X Bhd., AirAsia’s long-haul arm.

Cargo and Logistics

The company’s business operations have seen positive developments “as passenger seat booking trends, flight frequencies and load factors are gradually improving to cater for the increasing demand,” AirAsia said Tuesday.

“The financial statements of the group and the company have been prepared on a going concern basis” that will be dependent on the outcome of the fundraising proposals and recovery from the pandemic, it added.

As of June 30, AirAsia had 996.1 million ringgit of cash compared with 2.59 billion ringgit a year ago. Some 42% of the airline’s revenue in the second quarter came from cargo and logistics.

South Korea’s SK Group said in June that it was in talks to buy a small stake in AirAsia, without providing further details. AirAsia has also cut the salaries of management and deferred plane deliveries in an attempt to shave costs by 30% this year.

The budget carrier is one of Airbus SE’s major customers for A320s while AirAsia X is the world’s biggest customer of Airbus A330neo planes. AirAsia X has 78 of the aircraft on order, according to Airbus’s website, and has already deferred delivery of some A330neos.