AirAsia set to lose over RM1.1 billion

AirAsia Group could report steeper losses in excess of RM1.1 billion in 2020, following its decision to ground its aircrafts worldwide due to the Covid-19 pandemic, according to Affin Hwang Capital.

The research firm said in a note today that the drastic move highlights the dire operating environment faced by the airline industry.

In tandem, it reiterated a “sell” on AirAsia’s shares with a lower 12-month price target to RM0.49.

Meanwhile, Philippines AirAsia, Thai AirAsia, PT Indonesia AirAsia and AirAsia India have similarly reduced their flight frequencies.

“To further manage and contain costs, the management and senior employees of AirAsia have volunteered for a salary cut, ranging from 100 percent at the very top to 15 percent,” it said.

AirAsia yesterday announced it was temporarily suspending all international and domestic flights operated by AirAsia Malaysia from March 28 to April 21, 2020. Other airlines within the AirAsia Group will similarly reduce their flight frequencies.

Affin Hwang Capital expects AirAsia to negotiate with its suppliers to reduce their operating costs, for instance operating leases, airport charges, fuel, operation and maintenance costs.

“We now expect AirAsia to report larger losses in 2020-2021 after incorporating lower revenue in view of the temporary suspension of flights and dire industry outlook; and lower operating costs arising from savings in staff cost, operating leases, fuel and operations and maintenance expenses,” it said.