COVID-19 crisis puts AirAsia IPO plan on hold

Air Asia Philippines’ planned stock market debut is taking a backseat as the budget airline moves to prop up earnings that are at risk due to the COVID-19 outbreak.

The budget carrier, part of Malaysia’s AirAsia Berhad, announced a strong financial turnaround in 2019, strengthening the case for a much-awaited initial public offering (IPO) late this year or in early 2021.

But in an interview last week, AirAsia Philippines CEO Ricardo Isla told reporters the airline was focusing on its domestic expansion after the Philippine government imposed travel bans on China and South Korea, threatening up to 30 percent of its revenue.

“So far, we didn’t revisit that IPO right now,” Isla said, referring to the company’s planned public debut that could raise at least $200 million for expansion.

“It’s still there in the planning but the more pressing matter is how to recover immediate losses from China,” he added. “At the end of the day, that’s when we do an IPO, our bottom line is very good.”

AirAsia Philippines announced a turnaround in 2019 as costs were contained and passenger revenues rose with more routes and added capacity.

Net income for the full year hit P1.87 billion, reversing a P3.5 billion loss in 2018, as revenue went up 31 percent to P27.35 billion, according to AirAsia Bhd.

AirAsia Philippines kept expenses down while it ramped up operations. The budget airline carried 8.55 million passengers last year, a gain of 25 percent, while capacity also went up 20 percent. Its average load factor, a measure of demand, ended at 88 percent, up three percentage points.

Isla said AirAsia Philippines had set aggressive targets for 2020 before the COVID-19 outbreak.

“We had a big target this year,” he said. “It looks like it’s not going to happen.”

“We have to revisit [the target] and we have to review. We have to be practical also,” he said without elaborating.

AirAsia Philippines competes with larger domestic carriers Philippine Airlines and Cebu Pacific. It claimed a market share of 23 percent, up 4 percentage points, in 2019.

To deal with the business challenges due to the COVID-19 outbreak, the AirAsia Group said it would boost marketing efforts and fare discounts, grow market share with more domestic and regional flights and implement cost controls, including a “hiring freeze for the airline business.”