Airlines carriers including AirAsia to face tougher operating conditions following the Covid-19 pandemic due to the restrictions and collapse in air travel despite having resumed its scheduled domestic flights. — Bernama photo
KUCHING: Domestic airlines are expected to continue facing tough operating conditions in the midst of the current Coronavirus Disease 2019 (Covid-19) situation but analysts believe that airports could see a recovery.
In a sector update report, the research team at Kenanga Investment Bank Bhd (Kenanga Research) expect airlines carriers including AirAsia Group Bhd (AirAsia) to face tougher operating conditions following the Covid-19 pandemic due to the restrictions and collapse in air travel despite having resumed its scheduled domestic flights.
Over the medium term, it anticipated for AirAsia to face tough operating environment of low loads derailed by widespread travel disruptions due to the Covid-19.
“The group has also restructured a major portion of the fuel hedges with supportive counter-parties and are still in process of restructuring the remaining exposure,” it said yesterday.
“The group have applied for bank loans in their respective operating countries to shore up liquidity, with net cash currently at RM1 billion as at March 31, 2020.
“In addition, AirAsia has ongoing deliberations with a number of parties for joint-ventures and collaborations that may result in additional third-party investments in specific segments of the group’s business,” it added.
As for airports in Malaysia, Kenanga Research believed MAHB will be hit by Covid-19 in terms of passenger traffic growth both in Malaysia and Turkey.
It added, MAHB’s management has highlighted that MAHB insisted on a 90-day credit period for rental of premises instead of rebates at the airport as well as landing and parking charges.
Nevertheless, while a prolonged pandemic would impact Malaysia Airports Holdings Bhd’s (MAHB) earnings, the experience from SARS suggested that passenger volume will see a rapid recovery once the pandemic subsides.
Kenanga research also highlighted that following April 12, 2019, MAHB announced that the Government had approved the extension of MAHB’s concession to operate 39 airports in Malaysia from 2034 to 2069.
“The new Operating Agreement (OA) with the Government following the extension of the concession (yet to be signed) will pave the way for the stock to be re-rated. We believe the new OA will be investor-friendly, and create a sustainable long-term development of MAHB.
Overall, Kenanga Research reiterated its ‘neutral’ stance on the aviation sector.