AirAsia Group anticipates a return to profitability “in the years to come”, with demand — particularly for domestic travel — expected to increase in the second half of the year.

At the release of its second-quarter financial results, group chief executive Tony Fernandes says AirAsia Group has reduced its costs “significantly” — through network optimisation and improved pricing strategies — in recent months.

The group will also shift its recovery efforts to domestic travel in the markets that it serves, as lockdowns imposed by local governments to curb the spread of the coronavirus are gradually lifted.

By the end of the year, it expects to run at up to 75% of pre-pandemic domestic capacity for its Malaysia and India operations, with 60% and 35% for its units in Philippines and Indonesia respectively.

Its Thai unit is expected to see a 5% capacity growth year-on-year, by the final quarter of the year.

Group president for airlines Bo Lingam says: “Reviving domestic travel is high on our priority list as an opportunity to strengthen our domestic position in all of our key operating markets. Demand is expected to build up in 3Q 2020 and 4Q 2020, supported by both business and leisure travel.”

The rising domestic demand will give the group sufficient liquidity for the rest of the year, says Fernandes.

“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,” he says.

Fernandes adds that the group has been “actively exploring” capital raising opportunities in its operating markets to help in cash flow levels. 

“We believe we have set the right foundations for the airline in the second quarter of 2020 as we move into the second half of the year, with the continued understanding of our customers and support from our lessors, hedge counterparties and business partners. Furthermore, we are working together with our creditors on repayment plans,” he says. 

For the three months ended 30 June, AirAsia Group slipped further into the red, reporting an operating loss of MYR1.18 billion ($283 million), higher than the MYR470 million loss it posted the previous quarter.

Group revenue collapsed for the period, falling nearly 96% year on year to MYR119 million, as the group’s carriers carried far fewer passengers.

Expenses, meanwhile, declined 53.5% to MYR1.33 billion. While the group managed to shave off most costs during the period, it saw depreciation costs spike, due mainly to a larger number of leased aircraft in its fleet.

The group reported a net loss of a MYR1.16 billion for the period, reversing the MYR46.8 million net profit last year.

While the group’s carriers all carried far fewer passengers year-on-year, Lingam notes that the quarter ended “on a stronger note”, with passenger volumes and load factors showing improvement in May and June, compared to April.

AirAsia Malaysia saw a three-fold increase month on month in passengers carried in June, while AirAsia Thailand doubled the number of passengers.