AirAsia to distribute e-vouchers to nudge consumers to fly domestically

Shortly after Malaysia Airlines unveiled a special incentive programme to promote domestic travel, AirAsia is also distributing RM50 e-vouchers to 24,000 domestic travellers to help stimulate domestic tourism and generate income for tourism-related businesses. These include hotels, restaurants and tour operators, among others. The move comes as AirAsia also supports the Cuti-Cuti Malaysia campaign by Tourism Malaysia. The e-vouchers will be made available for public redemption on its website soon. A+M has reached out to AirAsia for additional information.

Just yesterday, AirAsia Group posted a quarter-on-quarter (QoQ) revenue increase of 272% to RM443 million during the third quarter of 2020 (Q3 2020). Airline revenue decreased 87% YoY but grew five times QoQ with the gradual increase in capacity in line with demand as countries began to ease lockdowns and travel restrictions, it said. Less impacted in the quarter, non-airline revenue declined 45% YoY. 

Net operating loss for the quarter was RM1.2 billion, compared to RM2 million in profit in the previous corresponding quarter. While the group successfully reduced fixed costs by 50% YoY, AirAsia said in its financial statement that the loss was primarily attributed to a shortfall in revenue amidst subdued travel demand as international borders remained closed. 

Meanwhile, airasia.com narrowed earnings before interest, taxes, depreciation, and amortisation (EBITDA) loss by 72% to RM2.9 million, while BigPay revenue grew 4% YoY and 13% QoQ. Teleport reported positive EBITDA of RM20 million despite a decline in revenue from impacted cargo capacity due to closed borders. BIG Rewards also reported positive EBITDA of RM2 million due to higher revenue lifted by higher redeemed points. According to AirAsia, the new businesses that were born in 2Q to 3Q, including the airasia food, airasia fresh, airasia shop, the unlimited travel pass, OURFARM and SNAP have begun gaining traction.

President (airlines) of AirAsia Group Bo Lingam said its top priority at this point is to gradually increase its operations on phases, starting with strengthening its domestic foothold across its key markets as borders remain closed. For the fourth quarter, it expects to operate up to 31% of pre-COVID domestic capacity for AirAsia Malaysia, 47% for AirAsia Indonesia and 13% for AirAsia Philippines.

"We are encouraged by the strong rebound in domestic demand for AirAsia Thailand, which has operated 96% of pre-covid domestic capacity in September. We expect AirAsia Thailand to exceed its pre-COVID domestic capacity by the end of the year, while AirAsia India is expected to operate up to 67%. Meanwhile, we are also actively exploring opportunities for a local airline presence in IndoChina," Lingam added.

As for international routes, Lingam said the airline remains guided by the respective authorities of its key markets. Travel bubbles and green lanes for essential and business travellers have been formed and operated across ASEAN.

"We understand that some countries, such as Thailand and Singapore are actively exploring extensions for leisure travel bubbles with tight standard operating procedures. We foresee further formations of travel bubbles across countries in ASEAN which would boost our operations given our strong foothold and dominance in ASEAN," he added.

Meanwhile, group CEO Tony Fernandes said the cost-cutting strategies it embarked on earlier this year have allowed it to successfully cut its fixed costs by 50% this quarter. He also touched on the cessation of AirAsia Japan in October. Also just last week, AirAsia Japan filed for bankruptcy weeks after it ceased operations on 5 October. AirAsia said in a Bursa filing that the move was "due to insolvency resulting from a demand slump in travel induced by lockdown restrictions related to the coronavirus pandemic".

"Though it was a tough decision to make, it was necessary to reduce cash burn for the group due to the highly challenging operating market post-pandemic. In the Q3 2020, we have disposed of spare engines to further raise cash and are open to other potential monetisation opportunities where the value and time is right," he added.

Fernandes explained that the company is in the midst of securing commitments from the banks for the Danajamin PRIHATIN Guarantee Scheme in Malaysia and other bank financing in other markets. Other capital raising opportunities including a potential rights issue are in discussion and are actively being explored. 

The airline recently tied up with Turkish Airlines to leverage the rebound of international travel. As part of the strategic partnership, AirAsia can combine Turkish Airlines' flight inventory with its flights and offer itineraries with discounted fares, thereby boosting its pan-Asian flight network. Meanwhile, it also recently officially announced that it has entered the food delivery industry with airasia food. Airasia food said following the reinstatement of the Conditional Movement Control Order until early December, it saw a 1,150% increase in order volumes within the Klang Valley.

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