AirAsia sees brighter skies ahead after Malaysia lifted interstate travel restrictions, with the low-cost carrier also pushing to restart international flights to Thailand, Sri Lanka and the Maldives as early as next week, its president told Nikkei Asia.
Bo Lingam, AirAsia Group’s president for airline operations, said in an interview Monday that the company is “very relieved” with the government’s decision to reopen domestic borders as it will benefit both the carrier and its workforce.
The airline aims to go big on domestic travel by reaching a pre-pandemic capacity of 39 local routes and 169 daily flights by late November, according to Bo.
“We will open all domestic destinations that we were flying pre-COVID by the end of next month, involving over 45 aircraft,” he said.
The comments came after the federal government on Monday allowed interstate travel nationwide. The airline was hit hard by the coronavirus pandemic, with hundreds of its employees retrenched and aircraft idled after domestic and international borders were closed and travel limited.
The government of Prime Minister Ismail Sabri fully reopened state borders in the Southeast Asian country for the first time this year, allowing millions of residents to travel for business and leisure. Fully vaccinated Malaysians can also head overseas without police approval.
Air travel is indispensable in Malaysia as the country’s states are spread across the Malay Peninsula as well as the island of Borneo to the east across the South China Sea.
“The resumption of domestic service will be extremely good financially, for the airline as we would be able to pay pending bills from our suppliers who have been very nice to us to date,” Bo said.
He added that the carrier is also looking to begin commercial international flights to Thailand, Sri Lanka and the Maldives as soon as next week.
“We have applied for permissions in these countries and expect to receive them next week, after which we can sell tickets and fly passengers,” he said.
AirAsia’s share price jumped almost 10% on Monday, settling at 1.28 ringgit — the highest since February 2020 and outpacing the Bursa Malaysia index’s gain of almost 1%. On Tuesday, the airline’s shares fell 3% to 1.25 ringgit at midday.
The airline’s net loss in 2020 ballooned to 5.1 billion ringgit ($1.2 billion) from red ink of 315.8 million ringgit in 2019. Revenue also plunged from 11.9 billion ringgit in 2019 to 3.1 billion ringgit last year.
For the first half of 2021, the airline reported a net loss of 1.3 billion ringgit from 1.8 billion ringgit net profit during the same period of last year. Revenue, meanwhile, tumbled to 686.8 million ringgit from 2.5 billion ringgit.
AirAsia was recently granted a federal government-guaranteed 500 million ringgit loan under a framework introduced to assist companies directly affected by the pandemic. The loan was part of the 2 billion ringgit fundraising exercise mooted by the airline’s founder Tony Fernandes last year.
The airline carried 19 million domestic passengers in 2019 but that plunged to 6.3 million last year. It has flown less than 1 million passengers between January and October this year as controls on movement were strengthened to curb the third and fourth waves of coronavirus infections.
Bo also said the airline would reinstate some 300 employees currently on furlough to operate the domestic flights. Since last year, the airline has reduced head count by not renewing contract workers, retrenchments and furloughs.
“We would exhaust employees under furlough first, then look at rehiring those we had laid off as the capacity grows,” he said.
Experts say that while the return of interstate travel is undoubtedly a plus for AirAsia and competitors including Malaysia Airlines, it is far from a panacea.
Brendan Sobie, an independent analyst at Sobie Aviation, believes domestic passenger traffic could approach pre-pandemic levels by the end of this year, though heavy competition and overcapacity — similar to the industry situation before the pandemic — will weigh on further growth for the carrier.
“All airlines in Malaysia were unprofitable in 2019 and while domestic demand may now recover, many of the issues from prior to the pandemic have not been resolved, making a return to profitability difficult,” he said.
Shukor Yusof, an aviation consultant at Endau Analytics said the surge in domestic travel demand would help AirAsia, though “it won’t be anywhere enough to fix its battered bottom line.”
While Shukor said the Malaysian travel resumption itself is not an indication of a revival for the airline industry in Southeast Asia, he does view AirAsia as the carrier with the best long-term potential for post-pandemic growth.
“It’s a critical stage as key countries for tourism — Indonesia, Thailand, the Philippines — are still struggling to control the virus and there’s little coordination amongst ASEAN members to find a solution to allow intraregional air travel,” he said.
According to Sobie, Malaysian carriers need a recovery in both international and domestic travel to heal financially.
“There is now light at the end of the tunnel and the overall sentiment is more positive but the road to recovery will be long and filled with twists and turns,” he said. “The darkest days should be behind AirAsia but the outlook remains relatively challenging.”