Accounting firm Ernst & Young has questioned the AirAsia Group’s ability to remain a going concern, citing deteriorating finances amid the coronavirus pandemic.

It notes that the group suffered a full-year net loss of MYR283 million ($66 million) in 2019, a year in which liabilities exceeded assets by MYR1.8 billion.

“In early 2020, the global economy, in particular the commercial airlines industry, faces uncertainty as a result of the unprecedented Covid-19 pandemic,” says Ernst & Young.

“The travel and border restrictions implemented by countries around the world has led to a significant fall in demand for air travel which impacted the Group’s financial performance and cash flows. These events or conditions…indicate existence of material uncertainties that may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern.”

The statement accompanied the release of the airline’s audited accounts for 2019.

After losing money in 2019, AirAsia Group lost MYR953 million in the first quarter, compared with a MYR102 million profit a year earlier. The airline attributed the weakness to the outbreak and weak air travel in February and March as the pandemic intensified.

Ernst & Young, however, notes that restrictions on interstate travel and domestic tourism in Southeast Asia provide some relief with improved seat booking and frequencies. It also notes that load factors are ranging between 45-65% in countries where domestic flights have resumed.

It adds that the fate of the AirAsia Group depends upon a successful recovery from the pandemic, in addition to a successful outcome of talks with financial institutions and investors.

Units AirAsia Philippines and AirAsia Indonesia have also applied for loans. AirAsia Philippines is expected to obtain a government backed loan as part of a local stimulus package. The company is also deferring payment of operating leases, restructuring fuel hedges, and reducing pay.

“The Group is currently in the process of negotiating further waivers or deferrals of lease rentals, and restructuring the remaining fuel hedge exposures with supportive lessors and counterparties,” says Ernst & Young.

In the Group’s fourth quarter earnings release on 6 July, chief executive Tony Fernandes described the coronavirus crisis as the “toughest challenge” the airline has faced since it began operations in 2001. He says the group has been restructured into a “leaner and tighter ship”, reducing cash expenses by at least 50%.

He added that the company had received proposals from investment banks and investors in regard to shoring up its capital and liquidity.

Cirium fleets data indicates that the AirAsia and AirAsia X orderbooks comprise 479 Airbus narrowbodies and widebodies. Fernandes has said that the Group will take no new aircraft this year.