AirAsia expects to resume flying to most routes by the end of 2021, CEO Tony Fernandes says

SINGAPORE — The outlook for the global aviation industry is improving as more countries begin rolling out mass immunization programs against Covid-19, AirAsia boss Tony Fernandes said Tuesday.

As one of Asia’s top budget airlines, AirAsia expects to resume flying to “a large part” of its routes by the end of 2021 but passenger capacity is not expected to return to pre-coronavirus pandemic levels until 2023, according to Fernandes.

“It’s been the toughest challenge,” he told CNBC’s “Squawk Box Asia,” as part of the network’s coverage of the Davos Agenda. “But I think the outlook’s getting better.”

“The most important thing is there’s a huge amount of demand out there and we just have to wait for borders to open and I think we’re one of the first kind of businesses that will recover, from an airline perspective, because we’re very strong in domestic and regional,” he said.

The coronavirus pandemic has crippled the global travel and tourism sector. It’s sent many airlines into survival mode as they undertake mass layoffs, cancel orders, retire some of their existing fleet and cut down routes.

In December, the International Air Transport Association (IATA) said airlines will suffer a net loss of $118.5 billion for 2020 and an expected net loss of $38.7 billion in 2021.

AirAsia is also struggling. In November, the company reported a fifth straight quarterly loss between July and September and is in the process of raising funds through loans and investors. Fernandes said the company is looking at raising up to 2.5 billion Malaysian ringgit ($618 million) for the whole group. That includes AirAsia’s digital business and the logistics unit — both of which are performing well, according to Fernandes.

“We’re a little bit behind schedule than we wanted to be but the amount’s exactly where we want to be. We are very confident that this capital that we’ll raise will take us well into 2023,” he said, adding that the company will emerge with a better cost structure, a strong digital business and good demand for the airline.

The AirAsia stock is down almost 22% so far this year.

Fernandes also said AirAsia is in talks with Airbus and that the airline’s long-term order book remains. “We’re going to have to defer some of it to a later date,” he said, adding, “We don’t want to change that for short-term decisions.”

AirAsia is one of Airbus’ largest customers since the airline made a switch from Boeing years ago. Reuters reported that since then, AirAsia has ordered a total of more than 660 Airbus jets including planes yet to be delivered.

The CEO explained the competitive landscape for airlines has changed due to the pandemic. Some carriers have either reduced capacity or left the market altogether. Cost-cutting measures from AirAsia are expected to improve the company’s margins, he said.

Budget airlines that fly shorter routes and sell on-demand services are expected to recover quicker than carriers that fly to intercontinental destinations and rely on first and business class travel, according to Fernandes.

He said business travel will take a longer time to recover as more people would opt to conduct business meetings virtually. “Time is a great healer. Eventually, business travel will come back but there’ll be an element that will say ‘well I can do it from Zoom,'” Fernandes added.