AirAsia chief executive Tony Fernandes has highlighted “encouraging” forward bookings and sales as the low-cost carrier seeks to recover from the impact of the coronavirus crisis.
“There was a point where you couldn’t see where the light was going to come from,” Fernandes acknowledged during an 18 June webinar organised by Credit Suisse – but now, “robust demand is coming back.”
The carrier hopes to operate roughly 50% of pre-Covid-19 capacity by the beginning of July. Fernandes believes passenger demand could return to 2019 levels by the end of 2021, although he stresses that this is a “guesstimate.”
Despite this confidence, the budget carrier is securing three different tranches of liquidity to shore up its position. “As a defensive we’re raising as much capital as we can,” says Fernandes.
The main question in the short term is how quickly governments in the region are willing to open their borders given the risk of spreading infection. Over a slightly longer timeframe, AirAsia believes its position as the lowest-cost provider in the region should allow it to benefit from the post-pandemic economic landscape, as customers seek out the cheapest options.
Benefits will also, the airline expects, arise from having passengers who tend to be younger than those of legacy carriers, and therefore less likely to be concerned about infection, and from a lower proportion of business travellers.
“I think we are in the better part of that market… It’s a more resilient market,” notes Fernandes. “Being a low-cost carrier in this position is slightly easier than [the] full-service model.”
Comparing AirAsia with its low-cost brethren in Europe, Fernandes notes it is not competing against state-backed carriers that have secured state support. “So what we are seeing is fares hardening from government-owned airlines because they have to make money,” he says. As a result, AirAsia has not yet been forced to slash its prices.
Covid-19 has also changed the equation when it comes to AirAsia’s fleet. The airline is a long-time Airbus customer, but the coronavirus means it is unlikely to take delivery of new aircraft for “a long, long time”, Fernandes believes.
“There’ll be a lot of planes parked in the desert” that could offer better returns than new equipment, he says. “Fifteen percent fuel savings [on a new aircraft], I don’t think the capital costs would justify that.”
Lower demand could also herald a shift away from Airbus A321s to smaller versions of the aircraft family. “The A321 is a fantastic plane, it gives us that extra 50 seats, but we’ll be fine with A320s with 180 seats for the moment.” Because of its size, the A321 was a better fit for slot-constrained airports, he highlights, but given the pandemic’s impact on demand, “I think that’s all changed now”.
