(Updated)

AAX to focus on medium-haul flights for commercial viability going forward

AAX to focus on medium-haul flights for commercial viability going forward
-A +A

KUALA LUMPUR (June 15): AirAsia X Bhd (AAX) will focus on medium-haul flights moving forward to ensure commercial viability as part of its strategy to swing the airline back to profit, according to its chief executive officer (CEO) Benyamin Ismail.

“The key thing in our strategy is to have a model that flies profitably, we have to make sure that is very important for the company to survive, and also route decisions that are commercially viable for the business itself,” he said at an AAX event held on Wednesday (June 15).

Aligned with this, Benyamin announced the airline’s seven new medium-haul routes — namely from Kuala Lumpur to New Delhi, Sydney, Seoul (Incheon), Tokyo (Haneda), Sapporo (Chitose) and Osaka (Kansai), as well as from Osaka to Honolulu.

However, he added that the budget airline — known for its long-haul flights — has also planned long-haul flights from Kuala Lumpur to London, Dubai and Istanbul.

He noted that these new long-haul routes to Europe are exceptions to their medium-haul shift in focus as it sees an opportunity to capitalise on rising demand as travel restrictions are lifted.

“Generally medium-haul is the model, but I think we saw the pent-up demand of going to Europe, especially London. Also, the fact that we have been able to restructure the business, [which resulted in] cheaper costs, it looked more feasible for us to do it. 

“[Our long-haul destinations to Europe] will only be these two (London and Istanbul), I do not think we would be adding any more. I think these are the only two that we feel would work,” Benyamin told reporters on Wednesday.

AAX was handed a lifeline after it garnered near unanimous support from its creditors in the face of its RM63.5 billion worth of debts — whereby it would only need to pay 0.5% of what it owed under the restructuring process. 

On the back of this, the airline was lifted to the black for the third quarter ended March 31, 2022 (3QFY22) with a net profit of RM33.62 billion after writing back a similar amount back to profit.

Meanwhile, excluding the provision write-back, AAX logged a loss before interest, tax, depreciation and amortisation of RM6.08 million in 3QFY22.

However, Benyamin said with the operating costs it cut after the restructuring process, the airline can return to profitability after its operations scale up and recover.

“We restructured the company, so we reduced the [operating] costs quite a bit, so hopefully we should be able to get back to profit. [First], we have to get back to critical mass,” he said.

He noted that AAX remains confident in returning to pre-Covid-19 pandemic capacity, but noted that it will take time as it waits for the market to open up.

“Ideally, we have to be careful going back to pre-Covid-19 [capacity], we have to ensure that we are profitable first with what we are doing now. 

“Internally, we have projected that [we will return to] pre-Covid-19 capacity in two years,” he added. 

Prior to the Covid-19 pandemic, the airline was loss-making since FY18 — with a full-year net loss of RM312.7 million — followed by net losses of RM489.48 million in FY19, and RM1.34 billion in the 12-month period ended Dec 31, 2020.

Benyamin noted that the airline currently has six aircraft operating and plans to have 15 planes in service by the end of 2022 — five in storage and are to undergo maintenance, repair and overhaul (MRO) services, while the other four are to be acquired and added to its fleet. 

“Generally there are bottlenecks in all MRO services, but we foresaw this issue ahead of time so we planned our schedules for all checks coming, so as it is there is one aircraft going in every month. 

“So hopefully by January [2023], the five planes I mentioned earlier will be serviceable and flying hopefully by then,” he added. 

Shares in AAX were down two sen or 3.7% at 52 sen at the time of writing, giving the company a market capitalisation of RM215.7 million.

Surin Murugiah