AirAsia’s massive net loss revealed

Malaysian budget airline, AirAsia Group Bhd, has reported its worst ever quarterly earnings period.

The company’s net loss in the final quarterly of 2020 hit US$590.72 million (2.44 billion ringgit) versus a net loss of US$92 million in the prior corresponding period.

Revenue fell 92% as capacity shrank by 88% compared to a year ago, mainly because of fewer flights in Malaysia, the Philippines and Indonesia, due to international border closures.

It also recorded a spike in impairment of receivables from affiliate AirAsia X due to restructuring, and AirAsia Japan, which has started bankruptcy proceedings. AirAsia Japan was shut down in October.

“A major portion of the loss for the period relates to depreciation of (right-of-use assets) and interest on lease liabilities amounting to 654.2 million ringgit,” the airline said in a stock exchange filing.

The fourth-quarter result brings AirAsia’s full-year net loss to around US$1.2 billion (5.1 billion ringgit) compared to a loss of around US$75 million (315.8 million ringgit) the year before, making it the company’s worst ever year on record.

Earlier this this year, AirAsia completed two private placement tranches, raising a total of US$81 million (RM336 million), both tranches made up 470.21 million shares, representing 14.07% of total issued shares. Key investors included Hong-Kong based Dr. Stanley Choi, David Bonderman and several Partners at TPG.

The raisings were part of a broader plan to raise between RM2.0 billion to RM2.5 billion in a combination of debt and equity funding to ensure sufficient liquidity.

Optimism for 2021 and beyond

AirAsia Group’s President (Airlines), Berhad Bo Lingam is optimistic travel patterns are beginning to normalise after what he labels a “year of survival”

In Malaysia, we are pleased that the domestic leisure bubble kicked off in mid-March following the easing of restrictions including the relaxation on cross-state tourism among states under the Recovery Movement Control Order status. We are encouraged to see strong pent-up demand translating into spontaneous travel and an increase in forward bookings, as we briefly saw in December 2020 prior to the lockdown in January 2021,” he said.

“In Thailand, we are set to resume operations on all 40 domestic routes from April, including cross-region connections to meet the surge in demand, indicating a strong recovery to pre-Covid performance levels.

“In regards to international routes, we are optimistic that operations will resume in the second half of 2021, highly influenced by the efficiency of vaccination rollouts globally. Within Asean, most countries are in the midst of vaccinating their population in phases to reach 40%-50% by 3Q2021. Once borders are lifted, we expect to see a strong recovery in our overall performance given our low-cost model and dominant positioning in Asean.”

AirAsia Group Bhd (KLSE:AIRASIA) was listed on the Main Market of Bursa Malaysia Securities Berhad in November 2004. It is Malaysia’s largest airline in by fleet size and destinations and Asia’s largest low-cost airline by passengers carried.