Malaysian brokerage firm CGS CIMB Securities has questioned the ability of AirAsia X to survive the collapse in international air travel.

In a research note entitled “Low probability of survival,” CGS CIMB says that the long-haul, low-cost carrier’s first quarter results were just the “opening scene for the horror movie of the year.”

The carrier released its first quarter results last week, recording an operating loss of MYR158 million ($37.3 million), widening from MYR29.5 million a year earlier. Revenues were MYR924 million, down 21% from a year earlier. The airline’s MYR550 million net loss compared with a net profit MYR43.3 million in the first quarter of 2019.

“[Air Asia X] is currently negotiating with suppliers to reduce aircraft lease rates and to pay on a per-use basis, to early-return leased aircraft that is in excess of future requirements, to reduce airport charges, to revisit terms with business partners, and to restructure its fuel hedges with the remaining 30% of counterparties that have yet to agree to defer payments,” says CGS CIMB.

It adds that the airline, which operates only international services, has been particularly hard hit by Malaysia’s Movement Control Order, which has all but cut Malaysia off from the world since March.

“Domestic air travel is recovering within Malaysia, but as [AirAsia X] is a long-haul airline, it will have to wait a lot longer for international borders to reopen.”

The brokerage predicts that the airline’s survival depends on a cash injection, and that the airline is in negotiations with banks for a new MYR500 million loan. Should the banks agree to this loan, AirAsia X would seek an 80% guarantee from Danajamin, a loan guarantee scheme set up by the government to help support financial institutions amid the crisis.

“Our view is that it will be unlikely for any bank to agree to provide liquidity unless there is shareholder support,” says CMS CIMB.

“But we have no evidence of either the individual shareholders of [AirAsia X], or AirAsia, willing to top up equity, and the Malaysian government has so far not offered state backing (apart from the offer of a Danajamin loan guarantee). In short, we believe that [AirAsia X] is unlikely to secure the debt or equity funding it needs to see it through the Covid-19 pandemic.”

Nonetheless, AirAsia X itself sounded upbeat in its results release, stating its confidence that demand “will pick up towards the end of 2020.” In the meantime, it said it will remain in “hibernation mode”, maintaining “minimum connectivity” with “essential cargo and charter flights.”

Cirium fleets data indicates that AirAsia X has four A330-300s in service, and 19 in storage. In addition, it has orders for 116 Airbus jets comprising 30 A321XLRs, 76 A330neos, and 10 A350-900s.