Analysts ditch AirAsia after record loss; AirAsia X does poorly

AIRASIA Group Bhd, which helped pioneer a wave of low-cost air travel in the region, has fallen even further out of favour after posting a record loss on Tuesday.

At least eight analysts tracked by Bloomberg have revised down their recommendations or price targets on AirAsia's shares since it announced a net loss of RM992.9 million (S$326 million) for the quarter through June. One of them, CGS-CIMB's Raymond Yap, slashed his target by 74 per cent to just RM0.15.

From a total of 20 analysts, 18 have sell or equivalent ratings on AirAsia and the average price target is RM0.56. The airline's shares fell 2.8 per cent to RM0.68 on Wednesday, taking its loss for this year to 60 per cent. Its long-haul unit AirAsia X Bhd has fared similarly poorly.

While not enough to sway most analysts, Malaysia-based AirAsia's earnings statement pointed to some encouraging trends in bookings, flight frequencies and load factors as travel restrictions are lifted in the countries where it operates.

The carrier is in fundraising talks with financial institutions to help it through the Covid-19 crisis, which CEO Tony Fernandes has described as "by far" the toughest challenge the company has faced.

Citi Research noted on Wednesday that AirAsia is looking to raise RM2.5 billion to RM3 billion through a combination of equity and debt around the end of 2020. It also won't take any new aircraft over the next two years, said Citi, which has a sell rating on AirAsia and a RM0.58 price target.

Analysts from AmInvestment Bank forecast AirAsia to report a RM2.1 billion loss this year. "We expect the recovery in the air travel industry to be bumpy given the uncertainties surrounding the reopening of borders and urgent need for airlines to recapitalise their balance sheets," they wrote in a report.

Meanwhile, Reuters reported that AirAsia X Bhd needs creditors' support to ride out the Covid-19 crisis, as it posted a quarterly loss and revenue plunge. The company reported a net loss of RM305.2 million for the April-June quarter versus a net loss of RM207.1 million a year earlier.

Revenue tumbled 91 per cent to RM91.4 million, it said in a bourse filing, as air travel was almost brought to a halt by restrictions to control the Covid-19 pandemic.

AirAsia X said it continued to face severe liquidity constraints, and to seek payment deferrals and concessions from suppliers, lessors and lenders. It will also implement further payroll cuts in the next month.

It said its ability to continue in business depended on a gradual resumption of scheduled flights in early 2021 and a return to profitability, contingent on support from aircraft lessors, maintenance service firms and financial institutions.

AirAsia X said that in the current uncertainty over the lifting of border restrictions, it had stopped selling tickets for future travel dates. Its aircraft fleet remains grounded, apart from limited cargo and charter flights.

The airline operated only 16 scheduled flights during the quarter carrying 2,291 passengers, compared with 4,824 flights and 1,455,052 passengers a year ago.

The company hedged fuel this year at an average Brent price of US$61.45, and has restructured 70 per cent of its fuel hedging contracts, it said in a separate statement.

It said it expected to see some hedging losses as fuel prices are expected to remain weak in the near term. BLOOMBERG, REUTERS