Big losses for AirAsia in 2020, 2021 before 2022 turnaround?

KUALA LUMPUR: AirAsia Group Bhd is expected to incur large net losses in the financial years ending December 31, 2020 and 2021, analysts said.

The low-cost airline is only expected to be profitable again in 2022.

Affin Hwang Investment Bank Bhd expects AirAsia to post a larger net loss of RM2.92 billion in FY2020 before narrowing it to RM663 million net loss in FY2021.

Affin Hwang analyst Isaac Chow said this was after incorporating a lower revenue projection due to the weak recovery in travel demand and prolonged travel restrictions imposed by various countries, including the reimplementation of the Conditional Movement Control Order (CMCO) in Malaysia.

“We have lifted AirAsia’s FY2022 earnings forecast, expecting the low-cost carrier to report a profit of RM238 million in anticipation of stronger demand recovery following the availability of Covid-19 vaccines starting in the second half of 2021,” he said when reviewing AirAsia’s latest quarterly results today.

Affin Hwang has raised its 12-month share price target to 50 sen for AirAsia from 46 sen.

The firm has maintained a “sell” call for AirAsia due to its weak balance sheet and a very challenging business environment over the next few quarters.

“Although we are more optimistic on the long-term recovery of the aviation sector, we expect AirAsia to continue running its business as a going concern, in anticipation of a liquidity boost from new loans and equity raising(s) though the latter would weaken its share price if priced at a significant discount,” Chow said.

MIDF Research said AirAsia continued to be severely hit following a slew of Covid-19 triggered events which had highly impacted its business operations during the year.

This resulted in the carrier recording a third-quarter 2020 normalised net loss of RM1.3 billion, which was down by 34 per cent quarter-on-quarter (q-o-q) and -638 year-on-year (y-o-y).

This was on the back of RM387.3 million revenue (-469 per cent q-o-q and -87 per cent y-o-y), arising from most aircraft being grounded for several months due to border controls and movement restrictions orders.

Cumulatively, for the nine-month period, AirAsia’s earnings deviated from MIDF Research and consensus expectation by 44 per cent and 62 per cent respectively.

MIDF Research said despite how the odds were stacked against the airline, AirAsia was poised to survive the pandemic with stringent cost control and continue innovation of its business mode.

“The management indicated a conservative estimate that the group capital needs of between RM2 billion and RM2.5 billion to tide them over comfortably until end of FY2021.”

The firm added that AirAsia was securing commitments from banks under Danajamin Prihatin Guarantee Schemes while their Philippines and Indonesia entities were in various stages of bank loan applications.

“There are talks on capital raising on equity market but so far nothing is concrete yet, except there is urgency to the exercise as management wanted to complete the bulk of fundraising by end of January 2021,” MIDF Research added.

Source: NST