Despite doubts, AirAsia is confident that the LCC model will survive

Despite doubts by auditors, AirAsia is confident that the low cost carrier (LCC) model will survive and make it through this crisis, CEO Tony Fernandes said. This came after the company's auditors warned that the airline may not survive the pandemic.

In a report from Asian Aviation, Fernandes said in recent weeks travel is “gradually” resuming in some countries and said the “formation and discussion of ‘travel bubbles’ and ‘green lanes’ with key economic partners with a low infection rate and proven pandemic curbing systems, is a step in the right direction.

"As domestic travel is now allowed in Malaysia, Thailand, Indonesia, India and the Philippines, we have been resuming our flights on a staggered yet steady basis since late May,” Fernandes said. “In support of governments’ efforts to revive domestic tourism and ultimately stimulate economic recovery, AirAsia has aggressively launched large-scale promotions and sales campaigns. I am encouraged by the higher-than-anticipated sales this has generated. On 7 July, we registered our highest post-hibernation sale with 75,000 seats sold in a single day, reflecting pent-up demand and signalling green shoots of recovery. We also sold over 200,000 AirAsia Unlimited Passes since its recent launch for domestic Malaysia, domestic Thailand and AirAsia X."

Load factor continues to rise

AirAsia's group wide load factor has now reached 60% where the Malaysian unit itself has logged in 65%. As the airline industry also recovers where global capacity is set to break the 50 million mark by next week, AirAsia sees load factor to rise to even 70%.

AirAsia also continues to search for additional cash in order to improve liquidity. Fernandes said, "“We understand the importance of shoring up our liquidity to ensure sufficient cash flow. We have been presented with proposals in various forms of capital raising, be it debt or equity, and are in ongoing discussions with numerous parties, including investment banks, lenders, as well as interested investors in seeking a favourable outcome for the group,” Fernandes said. “We have received indications from certain financial institutions to support our request for funding, amounting to more than US$234 million. Of this debt funding, a certain portion would be eligible for the government guarantee loan under the Danajamin PRIHATIN Guarantee Scheme in Malaysia. Other than Malaysia, our Philippine and Indonesia entities are currently in various stages of bank loan applications. In the Philippines, we have applied for the government guaranteed loan under the Philippine Economic Stimulus Act (PESA), with an expected positive outcome."

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