Annual Report 2019

OUTLOOK The year 2020 has got off on an extremely challenging note, with the COVID-19 outbreak causing major disruption to travel globally. Restrictions imposed by governments left airlines, AirAsia inclusive, with no alternative but to temporarily suspend our flights. From the end of March till the end of April, the Group’s entire fleet was in hibernation, save to help repatriate citizens or to transport medical supplies and other essential items. As of end May, along with relaxation of travel restrictions, we started resuming domestic flights in the markets we are in, on a staggered basis. Supporting the Malaysian Government’s efforts to revive domestic tourism and stimulate the economy, we have been offering various promotions, with positive results reflecting pent-up demand. In June, we achieved an overall Group load factor of 60%, and 65% for the Malaysian operations. We expect the Group’s load factor to hit 70% in July despite a tripling in capacity. Our non-airline businesses, meanwhile, have continued to operate as per normal. Some even grew significantly despite Malaysia’s Movement Control Order (MCO). Teleport, for example, grew by 49% year-on-year in the first quarter of 2020 as a result of transporting medical aid and critical supplies. In addition, the technology-driven logistics company embarked on last mile deliveries of not only parcels but also restaurant orders and fresh produce, for which demand was particularly high. With the launch of Freightchain, the world’s first digital cargo platform built on blockchain; the re-launch of OURSHOP as an e-commerce marketplace; and rollout of OURFOOD bringing all types of food businesses online, Teleport’s growth prospects for the second half of 2020 are even stronger. During the MCO, Santan launched a drive-thru service to enable people to take home food safely. It also collaborated with the Food Aid Foundation on various initiatives, and helped small vendors market their food on its online Ramadan Bazaar. Going forward, we are working on the blueprint to start a franchise for ASEAN fast-food restaurant venture. BigPay made positive strides in 2019, and we expect it to continue with its growth momentum. BIG Loyalty is becoming a currency in itself and should gain more members as there is greater awareness that points earned can be redeemed for everyday items and services, in addition to flights. We also hope to sign on more artistes with RedRecords and launch them to a global audience. AirAsia.com already has the next few years outlined with plans to offer niche products such as Muslim and medical tourism packages, as well as attractive deals with wider appeal. Ultimately, it seeks to cater to as wide a consumer base as possible — not just AirAsia guests — and is charting a path to achieve this goal. Despite the unprecedented environment we are currently in, we are continuing to build on our strengths and especially our brand so as to emerge stronger when normalcy returns. Efforts to create a more seamless guest experience are intensifying with innovations such as FACES. Having already rolled this out in Avalon, Senai and Kuching, we are using data from the airports to identify and resolve existing pain points. Ultimately, we intend to develop FACES so it can also be used for more than just boarding clearance. We are also further enhancing AirAsia WiFi which we hope to install in more aircraft, enabling guests to order their food online and shop for any item available on OURSHOP, AirAsia Deals and AirAsia Activities. As travel picks up, we are collaborating with airport and health authorities to establish new norms to ensure safe air travel post COVID-19. Our aircraft are already fitted with hospital-standard high- efficiency particulate air (HEPA) filters. However, in line with the World Health Organization (WHO) and the International Civil Aviation Organization (ICAO) recommendations, we are also conducting thorough disinfections after every flight. In addition, we will continue with the social distancing measures implemented on ground and inflight. Financially, we are focused on ensuring the Group’s liquidity and capital adequacy. We have requested for more than RM1 billion in funding, and are currently in discussion with banks, lenders and investors on various forms of capital- raising. A portion of our loans would fall under the Government’s Danajamin PRIHATIN Guarantee Scheme (DPGS). Our subsidiaries in the Philippines and Indonesia are also seeking loans to tide over this challenging period. Further strengthening our capital, we have received deferrals from our lessors and are hopeful of further extensions of our aircraft operating lease payments. While a major portion of our fuel hedge contracts have been restructured, we continue to negotiate on the remaining exposure to reduce losses. We have also temporarily reduced salaries Group-wide by 15%-75% since April 2020 and are looking at organisational restructuring to achieve additional savings. According to the latest World Economic Outlook by IMF, GDP growth of ASEAN-5 is expected to rebound to 6.2% in 2021, one of the highest growth rates in the world. With the measures we have put in place, we are confident that AirAsia will not only benefit from this growth but also contribute to the region’s recovery. Once travel demand returns to normalcy, AirAsia will be there — stronger and more resilient — to make millions of travel dreams come true. In the meantime, we will focus on our digital pillar and help our business partners grow while also enabling Asians to enjoy at least certain aspects of the kind of lifestyle they desire. AIRASIA GROUP BERHAD ANNUAL REPORT 2019 91 PERSPECTIVE