AirAsia to face more losses ahead following pandemic

Analysts are expecting more losses ahead for the aviation sector, following the Covid-19 pandemic which is taking its toll on airlines operators including AirAsia Group Bhd (AirAsia).

The research arm of Kenanga Investment Bank Bhd (Kenanga Research) now expected lower load factors and yields, heavily affected by travel restrictions, causing AirAsia to hibernate flights across the group’s operating countries in Asean.

“We are expecting more losses ahead following the Covid19 pandemic which is taking its toll on airlines operators including AirAsia due to the restrictions and collapse in air travel,” Kenanga Research said.

“As such, over the medium term, we expect AirAsia to face extremely tough operating environment derailed by widespread travel disruptions due to the Covid-19, to be hit by both lower ticket prices and load factor which are likely to drag down yields, and hence a very challenging earnings outlook ahead.”

“With a net cash of RM2.2 billion as at December 31, 2019, we expect AirAsia to be able to weather through this Covid-19 crisis and hopefully without deteriorating its balance sheet.”

That said, Kenanga Research noted that in the meantime, the sector could be further derated by longer-than-expected recovery and mired with losses.

“Over the medium term, even when the services are reinstated, the road to recovery for air travel might take longer than expected.”

Elsewhere, the research arm expected maintenance cost to remain high due to accounting treatment for aircrafts under sales and leaseback arrangements.