KUALA LUMPUR (May 20): AirAsia X Bhd (AAX), the low-cost long-haul affiliate of AirAsia Group Bhd, posted its largest quarterly net loss of RM5.67 billion for the quarter ended March 31, 2021 as revenue shrank 29.6% quarter-on-quarter to RM38.49 million as the majority of its aircraft fleet remained grounded since mid-April last year amid the Covid-19 pandemic, apart from a limited number of cargo and charter flights.

The bigger net loss was mainly dragged by its other operating expenses, which amounted to RM5.21 billion in the March quarter, from RM45.06 million in the preceding quarter. These included rental of land, buildings and equipment, insurance expenses and total impairment of receivables of RM337 million relating to lease rental and maintenance reserve due from a joint venture through a third party leasing intermediary.

The airline's cash pile has also depleted substantially over the past 15 months to RM84.64 milion as at March 31, from RM307.62 million as at Dec 31, 2019.

In a bourse filing today, AAX — which is currently in talks with its lessors and creditors to reconstitute RM64.15 billion of debt into RM200 million — said during the March quarter, the airline had suffered from the full impact of the pandemic and with the suspension of its flight operations and the parking of the majority of its aircraft fleet, the performance indicators for the business are not meaningful.

It added that it will not be able to restart scheduled operations until there is an easing of travel restrictions and a gradual reopening of international borders.

"Malaysia itself will remain under the Recovery Movement Control Order until the end of August, which effectively prohibits outbound and inbound international travel, while the Australian borders remain closed and there are limitations still in place in China, Japan, India and South Korea," AAX said.

To maintain liquidity during these challenging times, AAX said it has sought payment deferrals and concessions from its suppliers, lessors and lenders, and reduced capital expenditure wherever possible.

"Salary reductions have been implemented across all levels of the airline, apart from the most junior staff, and headcount has been reduced by 10%, with further reductions planned, primarily in the flight operations-related functions.

"We have also restructured a major portion of our fuel hedges, and are still in process of restructuring the remaining exposure. The actual volume of fuel consumed, as compared to the hedged volume, will be lower in the post-Covid-19 environment and a restructuring of the fuel hedges will reduce expected hedging losses if fuel price remains below the hedged price," it noted.

As at March 31, 2021, it had no outstanding number of barrels of Brent and fuel derivative contracts.

AAX has also applied for bank loans to improve liquidity and has commenced bilateral negotiations with its aircraft lessors and maintenance partners to significantly reduce the operating cost base of the airline. "This process is ongoing."

It added that it plans to make an application for a government guaranteed loan of up to RM500 million under the Danajamin PRIHATIN Guarantee Scheme (DPGS). "This application is subject to the credit assessment, final evaluation and approval from the relevant financial institutions. At present, the airline is in discussion with a financial institution to secure the DPGS loan."

"In the current circumstances, the airline continues to face severe liquidity constraints. The management and the directors will continue to seek additional liquidity and work towards a material reduction of the airline’s cost base to enable AAX to continue as a going concern in the post Covid-19 environment, when overall demand for international air travel is expected to be significantly below the level of 2019 and previous years," it added.

Last December, AAX had changed its financial year end from Dec 31, 2020 to June 30, 2021. As such, there will be no comparative financial information available for the preceding year corresponding periods.

For the 15 months ended March 31, 2021, AAX's net loss stood at RM7.01 billion on revenue of RM1.17 billion.

AAX shares closed 0.5 sen or 6.67% lower at seven sen today, with 4.82 million shares done. Its market capitalisation was RM272.22 million.