Preparing for the worst, loss-making AirAsia X has announced plans to defer 78 Airbus A330neo deliveries; also planning to cut unprofitable routes, as the coronavirus situation worsens.
According to Reuters, the airline is already holding talks with lessors, to return five aircraft early, and cut lease rates by up to 30 percent to cope with the upcoming turbulence. Additionally the airline plans on selling two of their 24 Airbus A330-300s, to add $100 million to their available funds.
Citing the fast-spreading coronavirus, how long AirAsia X plans to defer the 78 A330neo deliveries is unknown; depending on when the global virus outbreak is contained and how soon passenger traffic will return to normal.
A spokesperson for the airline has told Reuters that the airline will assess market conditions, to determine when and where aircraft can begin to be delivered and start operating. Airbus declined to comment on customer delivery schedules.
Flights to mainland China and parts of Northern Asia account for roughly 30 percent of AirAsia Xs flights, however since the coronavirus begun spreading, and travel bans started to come into effect, the airline has had to cancel a significant amount of flights. For March 2020 alone the airline has over 600 flight cancellations, which will cause considerable pain to their financial results.
“…A downtrend has been observed on passenger bookings in the forward months, as all tourism-related businesses face the impact of the Covid-19 outbreak. The Covid-19 outbreak has impacted AirAsia X particularly as we are one of the largest foreign airlines operating into China, a market which represents 30% of our capacity.”
AirAsia X Group CEO Nadda Buranasiri
In terms of routes, AirAsia X has aggressive plans to cut a number of unprofitable routes; to destinations such as Tianjin and Lanzhou in China and Jaipur in India.
AirAsia X also plans to establish a dual-type fleet consisting of Airbus A330neos and A321neos, including the A321XLR, to better serve routes, hopefully recovering the airline from multiple yearly losses. From its Kuala Lumpur hub, the airline will begin using Airbus A321s to operate flights up to six hours long instead of the widebody A330s.
Despite the deferral of A330neo orders, and an order reduction from 100 to 78 aircraft in August, AirAsia X still remains to be the largest customer for the A330neo.
Unfortunately for the airline, the coronavirus situation comes at a time where Chief Executive Officer, Tony Fernandes, and the Chairman, Kamarudin Meranun, have both stepped aside for two months; as investigations, lead by the United Kingdom’s serious fraud office, allege that Airbus paid $50 million for a large aircraft order.
When the corruption case was reported on the 3rd of February, AirAsia shares fell as much as 11 percent to $0.31; which Al Jazeera reports as the lowest since May 2016. Meanwhile AirAsia X shares plummeted 12 percent, to an all-time low to $0.03.