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Budget carrier AirAsia is confident it can return to profitability in 2021, CEO says

AirAsia, one of the top budget airlines in Asia, is confident it can bounce back to a profitable position next year, even as the threat of a resurgence in coronavirus cases is weighing down the global aviation industry, Chief Executive Tony Fernandes said on Wednesday.

That target “sounds incredibly bullish, but I’ve been through many, many crises before,” Fernandes told CNBC’s “Street Signs Asia.”

He explained that Asian authorities have become “much, much smarter” in the way they handle further outbreaks of the coronavirus disease, or Covid-19. That will help the region’s aviation industry to recovery in a “much more sustainable” way, he said.

“I think that’s giving me a lot of confidence in some of my bullish statements,” he added.

Measures to contain the spread of the virus — which include border closures and movement restrictions — brought demand for air travel to a sudden halt. Airlines around the world were left struggling financially, with many having to cut jobs and turn to government aid to stay afloat.

Malaysia-based AirAsia is no different. The low-cost carrier earlier this month reported a net loss of 803.8 million Malaysian ringgit ($ 188.4 million) in the quarter ended March 30. That was the airline’s largest first-quarter loss since it listed on the Malaysian stock exchange in November 2004, reported Reuters, citing Refinitiv data.

The AirAsia commercial sign seen in Kuala Lumpur, Malaysia.

Faris Hadziq | SOPA Images | Getty Images

Last week, auditors EY issued an audit opinion that cast doubt on AirAsia’s future given the slump in air travel on the back of the pandemic. The company’s shares plunged 17.5% after the release of the audit opinion.

Fernandes told CNBC the auditors gave “a very fair view” but reiterated that the airline is “well on the way” to raise the funds it needs to ensure its survival. He added that the funds could come in the form of a government loan, more equity issuance or debt.

The amount the company is looking to raise is “a moving target,” he said, adding that he’ll “be very comfortable with a billion” ringgit ($ 234.4 million) and “super, super comfortable with 2 billion ringgit ($ 468.9 million).”

The CEO also said as the airline resumes some of its flights, margins could be better compared to the pre-pandemic period. AirAsia has resumed around 50% of domestic flights in Malaysia and could soon restart flying to neighboring Singapore as both governments plan to allow travel between the two countries, according to Fernandes.

“Capacity is going to be reduced, fares are going to go up,” he said. “In some ways, margins will be much better than pre-Covid. While capacity may take awhile to go back to pre-Covid, it’s going to be much more profitable capacity.”

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