ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintIcon Twitter
Transportation

AirAsia seeks sources of cash as net loss widens

Malaysian carrier sells spare engines but says liquidity will suffice next year

AirAsia said it was in talks over investments in parts of the group's business.   © Reuters

KUALA LUMPUR -- Low-cost carrier AirAsia said it has halved its fixed costs and is exploring its options to raise working and operating capital, including selling spare aircraft engines, as the airline continues to struggle because of travel bans imposed in Malaysia, Indonesia and Thailand -- three of its core markets.

The airline's sales fell 86% to 442.9 million ringgit ($108 million) for the third quarter ended Sept. 30, compared with 3.07 billion ringgit in the corresponding quarter last year. Its net loss widened to 851.78 million ringgit from 51.4 million ringgit previously.

The third-quarter performance brings the airline's year-to-date sales down to 2.87 billion ringgit from 9.07 billion ringgit over the same period of the previous year. It has recorded a net loss of 2.66 billion ringgit for the cumulative nine-month period.

Tony Fernandes, AirAsia's co-founder and chief executive officer, said the airline took the decision to sell spare engines in the third quarter and is open "to other potential monetization opportunities where the value and time is right."

"We foresee sufficient liquidity in 2021 with the expectation of upward growth trajectory in air travel demand amid the further formation of travel bubbles and green lanes," he said in a statement on Monday.

AirAsia told the stock exchange that it has applied for bank loans in countries where it operates to shore up liquidity. It is seeking a government-guaranteed loan in Malaysia, while loan applications are under way by the Philippines and Indonesia entities.

"We have also been presented with proposals to raise capital to strengthen our equity base and/or liquidity from a number of investment bankers, lenders as well as potential investors to help the company weather the storm caused by the Covid-19 pandemic."

"In addition, AirAsia has ongoing deliberations with a number of parties for joint-ventures and collaborations that may result in additional third-party investments in specific segments of the group's business," the airline said in its filing.

According to Fernandes, the air travel sector is expected to recover by mid-2021, given that a Covid-19 vaccine would be available for mass deployment by then.

"Despite expecting a capacity drop of 60% in 2020 due to minimum international operations, we are ready to rely purely on the strength of our domestic markets next year," he said, adding that the airline is also working on cutting operating costs and slashed fixed costs by 50% in the third quarter.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends January 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to Nikkei Asia has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media

Nikkei Asian Review, now known as Nikkei Asia, will be the voice of the Asian Century.

Celebrate our next chapter
Free access for everyone - Sep. 30

Find out more