Investment Management: Analysis of AirAsia Group Berhad's Financial Condition during Covid-19

Investment Management

Table of Contents
Question 1:.......................................................................................................................................1
Question 2:.......................................................................................................................................5
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Question 1:
(a)
AirAsia Group Berhad as a result of quarter ended in June 2020 after vastly spreading of Covid-
19, face near about 96% down in revenue from RM2.9 billion to RM119 million. Due to fleet
hibernations in March 2020, its revenue capacity has been reduced to 98% prior as a gradual
resumption of domestic operations, where till the end of April, travel restrictions has been
completely eased. In this regard, three major economic indicators which would be significantly
describe financial condition of this organisation during Covid-19, that deals under Travel,
Leisure & Hospitality industry, explained as below –
https://newsroom.airasia.com/news/2020/8/25/aagb-2q20-financial-result
Operating & Market share Performance
Since flights are gradually resumed after end of April 2020, where AirAsia Group has
seen a pick-up in number of key operational metrics relatively in June month as compared to
May, which includes tripling in passengers numbers carried by AirAsia Malaysia and doubling
the passengers’ numbers carried by AirAsia Thailand. Therefore, all these things leads to
increase 10% points in load factor, with reaching more than six times in numbers of travellers
carried by AirAsia India. This reflects the strong rebound demand in market for air travel. Along
with this, Revenue per ASK in second quarter of 2020, increased by 3% to 15.93 sen, so, this
attributed to adaptation of effective pricing strategy, with more rational competitor pricing after
fourth quarter since 2019. Furthermore, average fare also improved significantly by 34% Year-
of-Year from RM178 to RM239.
Cost performance
All operations-related costs of airlines are reduced by near about 72% on the back of
strict cost control of Group. Hereby, expenses on fuel are decreased with over 74% that are
attributed to reducing capacity. However, this has been offset by recognising the hedging loss of
approx. RM199 million. Along with this, staff costs are also reduced by 38% that is contributed
by the headcount rationalisation, with decreasing in maintenance and overhaul costs by 93%
because AirAsia Group Berhad has been optimised assets by using newer aircraft, which are
away further from major checks. Due to lower in volume of operations, user charge expenses are
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