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Malaysia’s AirAsia Group Records Narrower First Quarter Loss
Malaysia’s flagship low-cost carrier AirAsia Group filed a stock exchange on Thursday (May 27) showing a smaller first-quarter net loss – which marks its seventh consecutive quarter losses – having narrowed by 4.5 percent.
This loss was narrower as the airline was able to successfully negotiate with aircraft lessors on debt deferrals, resulting in approximately 80 percent reduction in repayments of borrowings and lease liabilities.
The Group posted first-quarter revenue of RM298 million (US$72.0 million), which was higher by 12 percent quarter-on-quarter but depreciated 87 percent year-on-year. Airline revenue was also negatively affected with a 91 percent decline year-on-year and 12 percent quarter-on-quarter as a result of restricted travel caused by the lockdown imposed in Malaysia since January 2021.
“As for AirAsia Malaysia, recovery remains subdued due to the lockdown measures imposed in Malaysia since early January 2021. We expect domestic operations in Malaysia and Philippines will be below 25% of pre-Covid levels, until at least September 2021, while more of the population are receiving their vaccinations.” President (Airlines) of AirAsia Group Berhad, Bo Lingam, said in a statement.
Currently, Malaysia is facing a new wave of Covid-19 infections with daily cases reaching record high numbers, and deaths increasing in tallies each day as well. The country is currently on the verge of a full lockdown with all sectors shut, which would most likely guarantee the safety of its citizens, but at the risk of an economy that could collapse. Should the full lockdown happen, AirAsia Group’s revenue might decline even further for the next quarter.
Having reported a net loss after tax of RM829 million (US$200.3 million), of which a significant RM527 million (US$127.3 million) was mostly due to depreciation of assets and higher interests on lease liabilities, despite the deal negotiated for deferrals. This was due to Amendments to MFRS16: Covid-19 Related Rent Concessions, the income statement charge for depreciation and interest were not adjusted.
The airline further reported that passengers carried totaled at 976,968, a drop of 90 percent from a year ago. While the load factor also dropped about 10 percentage points to 67 percent, which the airline cited as “a healthy load factor” that was a result of “active capacity management to match demand.”
Fixed costs saw a reduction of 54 percent year-on-year, continuing the positive downtrend on a quarter-on-quarter basis since the pandemic hit in late first quarter 2020. This was a result of better fuel hedge restructuring with supportive counterparts, allowing for the airline to not see any fuel hedging losses from the second quarter of 2021 onwards.
Confident in Ability for Quick Recovery
Despite the verging threat of a full lockdown and its seventh consecutive recorded net loss, the airline is still confident in its ability for a quick and strong recovery due to accumulated demand from passengers aching to travel, especially as vaccination rollouts gradually increase.
Lingam said, “We have observed strong indications, whenever there’s a relaxation in domestic travel restrictions, there is also a significant spike in spontaneous travel, resulting in an increase in forward bookings. We remain committed to further developing a solid foundation for sustainable future growth as we look ahead to our path to recovery.”
He is also confident in Malaysia’s aviation industry being stable enough as its Asia Digital Engineering (ADE) has been on the right track to becoming a leading aircraft maintenance, repair and overhaul (MRO) in the region.
ADE had recently received approval from the Civil Aviation Authority of Malaysia (CAAM) to perform base maintenance as well as line maintenance. With exceptional service quality and a lower cost base than many competitors, the airline foresees that this will become a significant profit-making angle in the future.
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