AirAsia Posts Worst Profits In History, But Sees Better Year To Come

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KUALA LUMPUR – Low-cost carrier AirAsia Group has racked up its worst annual profits in 2020 following the closure of national and international borders to contain the spread of the coronavirus pandemic, he said on Monday, but discussions on digital health passports and rapid COVID -19 vaccination programs promise better prospects this year.

The Malaysian airline’s net loss widened to 2.44 billion ringgit ($ 589.1 million) for the three months ended December 31 from 384.4 million ringgit in the corresponding quarter of 2019. Sales also fell to RM267.4 million from RM3.23 billion previously deposited on the local stock exchange.

The fourth quarter performance brought the airline’s full-year net loss to RM 5.1 billion from a loss of RM 315.8 million the previous year, the worst it has ever recorded. , according to a comparison of Nikkei Asia with previous results. Revenue fell to 3.14 billion ringgit from the 11.86 billion ringgit reported in 2019.

Tony Fernandes, CEO and co-founder of AirAsia, was optimistic about the future and said a recovery was in sight.

“With the acceleration of vaccination programs around the world, improved testing capabilities, the likely introduction of global digital health passports, the formation of pleasure travel bubbles in the region, and contactless procedures. already in place for AirAsia, we are very optimistic that international air travel will resume in the second half of 2021, leading to our full recovery in the next two years, ”he said in a separate statement.

AirAsia said pandemic lockdowns announced in Malaysia for October and November also weighed on fourth-quarter revenue.

The airline said it was pursuing cost containment measures, including staff and salary cuts for management, staff and directors, while efforts to preserve cash flow include negotiations for restructuring of staff. payments with suppliers, partners and others, as well as the restructuring of fuel hedging positions.

Fernandes mentioned that AirAsia had offloaded a 32.7% stake in AirAsia India while shutting down AirAsia Japan.

“All of these tough decisions were made to ensure a rapid recovery in ASEAN, where our brand is strongest,” he said, referring to the Association of 10 South Asian Nations. Is.

Throughout 2020, the airline earned 377.2 million ringgit on the sale of engines and $ 229.4 million on the sale of significant stakes in AirAsia India to Tata Sons.

A significant portion of the loss for the period relates to the impairment of right-of-use assets and interest on lease liabilities amounting to RM 654.2 million for the fourth quarter and RM 2.5 billion for the whole year, he said.

AirAsia is currently raising RM 2.5 billion for working capital, including a RM 300 million loan from the Sabah State Development Bank and is working on an undisclosed loan amount from the federal government dedicated to helping businesses affected by COVID-19 with a government guarantee.

“In addition, in Malaysia, we obtained commitments from banks to [a] government guarantee[d] loan under the Danajamin Prihatin guarantee scheme and it is in its final stages of discussing and finalizing the conditions, ”the company said.

Fernandes recently told local press that AirAsia is awaiting approval for loans from several banking institutions totaling RM 1 billion. The airline also completed the first tranche of its private placement of up to 20% of the group’s total issued shares last month, raising more than RM250 million.

In an interview with Nikkei Asia earlier this month, top AirAsia Group executives revealed ambitious plans to expand its digital footprint as core airlines’ business remains desperate for Malaysian authorities to reopen national borders by the end of April to avoid another round of drastic cost cuts. measures.

Bo Lingam, president of flight operations, said the carrier’s financial resources were running out and could only be managed if domestic routes were reopened by the end of the month, otherwise the company would be forced to lay off more workers. ’employees on leave.

Some 3,000 existing employees are on the scheme – mostly pilots and downstream treatments.

In contrast, AirAsia Digital, the holding company for non-airline companies, is heading for a potential spinoff in the next five years, said Aireen Omar, its chairman, adding that it was building core businesses including catering, food and beverage service. food delivery and courier services. attract more investors.

Fernandes praised these efforts.

“We are encouraged by the first signs of our digital transformation … and we expect our digital and non-air revenue will contribute about 50% to the group in five years,” he said in his statement.

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