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AirAsia X to “remain in hibernation”, posts net loss
July 31st 2020
AirAsia X Group said yesterday there was "no clear visibility" in the timing of the aviation sector's recovery from the coronavirus pandemic after the long-haul LCC posted a first quarter net loss of half a billion ringgit. Read More »
The 549.7 million ringgit (US$130 million) loss for the three months to March 30, 2020 represented a significant deterioration from a net profit of 43.3 million ringgit a year ago.
Revenue dropped 21% to 924 million ringgit, AirAsia X said in a regulatory filing to the Bursa Malaysia yesterday evening.
AirAsia X's Malaysia and Thailand operations have been in "hibernation" since March, with all scheduled passenger services grounded after the closing of international borders led to a global collapse in passenger traffic.
"AirAsia X will not be able to restart scheduled operations until there is an easing of travel restrictions and a gradual reopening of international borders, in recognition that air transport provides the connectivity essential for the resumption of economic activities," its financial accounts said.
“Despite having no clear visibility on the timing of the recovery at this point, the company remains confident that demand will pick up towards the end of 2020.”
During this period of hibernation, the airline group has utilised some aircraft for cargo-only services to support the transport of medical supplies and other essential goods. The company said it had operated 115 cargo-only flights at June 2020.
Some flights also have been for the repatriation of travellers to their home countries as COVID-19 spread.
When services do resume, AirAsia X's route network is likely to be much reduced from pre-COVID-19 levels due to "further cancellation of non-profitable routes" going into the second half of calendar 2020. The LCC has announced the cancellation of Ahmedabad, Gold Coast, Okinawa and Tokyo Narita.
"Aggressive capacity management since February is expected to continue for the remainder of the year as we brace for the COVID-19 impact," AirAsia X said in its slide presentation accompanying the financial results.
Further, the presentation also flagged a "potential sale" of two A330s to raise gross proceeds of US$100 million at market values to help AirAsia X manage cash flow and increase cost savings.
It also is seeking an early return of aircraft to focus on a remaining fleet of 16 aircraft, with one aircraft already returned early with no termination costs payable. The company is in discussions with suppliers, lessors and lenders on payment deferrals and concessions.
There have also been job cuts and salary reductions brought in for all but the most junior staff, with the prospect of more to come, “primarily in flight operations-related functions”, AirAsia X said.
At March 30, AirAsia X had 40 A330s in its fleet: 24 at AirAsia X Malaysia, 14 at AirAsia X Thailand (including eight aircraft on direct third-party lease to AirAsia X Thailand) and two aircraft at AirAsia X Indonesia, which "remain in suspension".
The LCC is in discussions with a financial institution to secure a government guaranteed loan of up to 500 million ringgit under a Malaysian government scheme, with the application subject to credit assessment, final evaluation and approval.
“In the current circumstances, the company continues to face severe liquidity constraints,” AirAsia X said in its financial accounts.
“The management and the directors will continue to seek additional liquidity and work towards a material reduction of the company’s cost base to enable AirAsia X to continue as a going concern in the post COVID-19 environment, when overall demand for international air travel is expected to be significantly below the level of 2019 and previous years.”
AirAsia X Malaysia carried 1.14 million passengers in the three months to March 30, down 25% from 1.51 million in the prior corresponding quarter. Capacity was cut by 21%, and demand declined by 28%.
With demand falling faster than capacity, the passenger load factor slid nine percentage points to 74%, AirAsia X said.
The unaudited quarterly accounts also included a reference to an auditors' report in respect of AirAsia X's audited financial statements for the financial year ended December 31 2019, which noted there was the "existence of material uncertainties that may cast significant doubt" on the company's ability to continue as a going concern.
The auditors noted the company's current liabilities exceeded current assets by 1.1 billion ringgit.
Written by Jordan Chong
