KUALA LUMPUR: AirAsia Group Bhd’s losses could widen this year, owing to lower load factors and yields exacerbated by travel restriction following the Covid-19 pandemic that caused air travel to collapse.
Kenanga Research aviation analyst Raymond Choo Ping Khoon said the current situation had taken a heavy toll on airlines operators, in particularly AirAsia which had hibernated flights across its operating countries in Asean.
Kenanga Research, in a report today, cut AirAsia’s financial year ending December 31, 2020 (FY20) earnings assumptions at a wider net loss of RM527 million from RM258 million net loss previously.
Choo cut AirAsia's target price to 60 sen from RM1.00 per share, despite maintaining its “underperform” call on the stock.
He said the government’s financial support to airlines could be the downside risk to its call.
He added that AirAsia Malaysia had temporarily suspended all international and domestic flights until April 25, while AirAsia Philippines until April 14.
AirAsia Indonesia is expected to see a sharp reduction in frequency in its international flights. Similarly, Choo said, adding that AirAsia Thailand’s international flights suspension would last until April 25.
“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,” he said.
However, Choo said AirAsia was likely to weather the crisis without deteriorating its balance sheet, citing that the airline had a net cash of RM2.2 billion as at December 31 last year.
Meanwhile, Choo expects lower passenger growth at local international airports as most countries imposed temporary travel restriction and airlines started grounding aircraft.
Malaysia Airports Holdings Bhd’s (MAHB) passenger traffic throughout its local airports declined 23.4 per cent year-on-year (YoY) to 6.24 million passengers in February from 8.15 million passengers recorded a year ago.
Both international and domestic passenger traffic reduced 29.7 per cent to 2.95 million passengers and 16.8 per cent to 3.3 million passengers in February 2020, respectively.
Choo ecpects MAHB to be hit by the Covid-19 in terms of passenger traffic growth and potential tariff rebates or discounts on its retail rentals.
“MAHB is still talking to the government in terms of mechanism on the recently-announced rebates on rental for premises at the airport as well as landing and parking charges.
“We highlight that management is not ruling out that the regulatory asset base (RAB) and discussion with the relevant authorities is still on-going.”
He said about 20 per cent of MAHB’s FY20 earnings could be impacted, assuming a 20 per cent rebate on both rental, landing and parking charges over a six-month period.
“We cut our passenger growth assumption in FY20 from 12 per cent to 4.0 per cent this year. We also revised downward our target price from RM7.20 to RM5.70, reflecting the de-rating of the market on the back of a bleaker economic outlook, both globally and for Malaysia,” Choo added.