February 27, 2020 / 12:00 PM / a month ago

Malaysia's AirAsia says 2020 targets look vulnerable to coronavirus

* Firm is redeploying capacity, aggressively marketing

* Board forecasts may not achieve internal projections in 2020

* Cancelled flights to China hits AirAsia X

* AirAsia’s 2nd straight qtrly loss, AirAsia X 3rd straight loss

KUALA LUMPUR, Feb 27 (Reuters) - Malaysia’s flagship budget carrier AirAsia Group Bhd may not achieve its internal projections for the year, as the industry takes a severe hit from the coronavirus outbreak, it said in a statement on Thursday.

AirAsia said the airline industry has been “severely affected” by the rapid spread of the virus this year and that it was managing capacity and costs.

“We are not spared the effects of Covid 19,” the airline said in a stock exchange filing, noting that the airline business remains the major contributor to the group’s financial performance.

“The Board is projecting that it may not achieve internal projections for the year,” it said.

Acting CEO and president Bo Lingam said in a separate statement that the airline continues to monitor developments and has in place proactive mitigating actions to limit the impact.

“This includes active capacity management since early February, aggressive marketing push to pursue market share, redeploying capacity to domestic and intra-Asean flights as well as engaging and collaborating with industry stakeholders and authorities for incentives, discounts and rebates,” he said.

AirAsia has also hedged 73% of its fuel requirements this year at $59.71 per barrel and 19% of 2021 requirements at $59.45 per barrel.

The airline logged a second consecutive quarterly loss, largely impacted by losses in its Indian subsidiary.

The group said its financial performance for the October-December period was dragged down by results of associates and joint ventures, which included recognising AirAsia India losses.

Net loss narrowed to 384.5 million ringgit compared with a 395 million ringgit loss a year ago. The result fell behind the 481.6 million ringgit profit estimate by one analyst polled by Refinitiv.

Revenue grew 19% to 3.36 billion ringgit as total passengers carried by the airline grew 9% to 13.2 million.

The passenger load factor for the period, a measure of how full planes are, fell 2 percentage points to 82%.

The airline’s long-haul arm AirAsia X Bhd also reported its financial results, posting a widened net loss of 95.8 million ringgit compared with 88.1 million ringgit loss a year ago. Revenue was higher 3.6% at 1.2 billion ringgit.

AirAsia X said ticket sales to Japan, Korea and Australia were impacted but the Chinese market was hit the hardest by the virus outbreak.

“The Company will have to bear the cost of ticket refunds for passengers who have cancelled flights to China,” it said in a bourse filing.

Forward ticket bookings are also trending lower and fares are expected to be under pressure for the next couple of months, it said.

AirAsia X will launch extensive promotional campaigns and redeploy capacity into other core markets, it said.

AirAsia was recently embroiled in a corruption scandal in which plane maker Airbus was alleged to have paid a $50 million bribe to win plane orders from the airline.

CEO Tony Fernandes and Chairman Kamarudin Meranun have stepped aside for at least two months amid investigations. (Reporting by Liz Lee; Editing by Elaine Hardcastle)

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