(This story has been updated with additions from the group's press statement)

KUALA LUMPUR (Aug 25): Following its record quarterly net loss of RM803.55 million in the first quarter ended March 31, 2020, AirAsia Group Bhd sank further into the red with a net loss of RM992.89 million in its second quarter ended June 30, as the group faced the full brunt of the pandemic outbreak.

This came as the group's revenue shrank 95% quarter-on-quarter to RM118.96 million from RM2.31 billion. In contrast, AirAsia recorded a revenue of RM2.92 billion in the previous year's corresponding quarter (2QFY19), with a net profit of RM17.34 million.

The 96% year-on-year (y-o-y) revenue drop was primarily due to a 98% y-o-y decline in airline revenue, as capacity was significantly reduced due to fleet hibernation at the end of March, prior to gradual resumption of domestic operations from the end of April as travel restrictions eased.

"The airline revenue in the quarter was also negatively impacted by RM60 million in refunds. Less impacted in the quarter [was] non-airline revenue [which] declined 55% y-o-y," AirAsia said in a statement.

The group's cargo and logistics operations, Teleport, meanwhile, saw its share of group revenue rise to an all-time high of 42%, as it transported medical aid and critical supplies during the quarter.

Besides a shortfall in revenue due to subdued travel demand because of lockdowns and border restrictions worldwide, AirAsia said its weakened quarterly performance was also due to a realised hedging loss of RM199 million. Consequently, the consolidated group posted a loss in 2QFY20 Ebitda (earnings before interest, tax, depreciation and amortisation) of RM683 million, in comparison to Ebitda of RM254 million in 2QFY19, it said.

For the first half (1HFY20) of its financial year ending Dec 31, 2020, it registered a net loss of RM1.8 billion versus a net profit of RM111.78 million a year earlier, while revenue dropped 57% to RM2.43 billion from RM5.65 billion.

The dismal results notwithstanding, the group's president of its airlines unit Bo Lingam said the group had managed to stabilise the airline business in 2QFY20.

"We will be able to maintain sustainable operations on the back of our domestic services for the rest of the year, if travel restrictions and border closures remain in place. Fares have been improving and we believe that competitors will continue to price rationally," he said.

During the lockdown, the group took the opportunity to restructure its operations and lay the foundations for a sustainable and viable business for the future, said AirAsia chief executive officer Tan Sri Tony Fernandes.

"Although we do not foresee capacity returning to pre-Covid-19 levels in the short term, we expect demand to gradually continue to grow throughout the second half of 2020 and for the airline to be profitable in the years to come, as costs have reduced significantly amidst our network optimisation and improved pricing strategies," Fernandes said.

He also said fuel hedging has been restructured for the airline, while operating costs have reduced and that the group have received support from lessors for deferrals. "Furthermore, we are working together with our creditors on repayment plans," he said.

He further assured that the group expects to have sufficient liquidity in the second half of this year and 2021, as it expects revenue to improve in tandem with rising domestic demand.

"Our cash flow is managed tightly and we are well prepared to rely on operating domestic sectors in the short term, if international travel restrictions continue. Aside from the major cost-cutting exercise we have embarked on across the group, we are also securing commitments from the banks for the Danajamin PRIHATIN Guarantee Scheme in Malaysia and other bank financing in other markets. We are also actively exploring capital raising opportunities in each of our key operating markets, which should aid in sustaining our cash flow levels," Fernandes added.

In its stock exchange filing earlier today, AirAsia said its Philippines and Indonesia entities were in various stages of bank loan applications.

The group also said it had been presented with proposals to raise capital to strengthen its equity base and liquidity from a number of investment bankers, lenders and potential investors, to help the company weather the 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," it said, but did not elaborate. “Barring any reversal of flight resumption plans and any major shock to demand, we foresee that we have sufficient working capital to sustain the business operations."

In June, it was reported that AirAsia was in talks to sell a 10% stake to South Korea's SK Holdings via a private placement. SK Holdings is the third largest Korean conglomerate, with businesses spanning from memory chips to energy.

AirAsia shares slipped 0.5 sen or 0.7% to settle at 70.5 sen today, giving it a market capitalisation of RM2.36 billion. Year to date, the stock has fallen 58%.

(Editing by Tan Choe Choe)