KUALA LUMPUR: While the Thai operations of AirAsia Group Bhd continues to drag on the earnings of the low-budget airline group, the falling rate of Covid-19 infections in the region offers optimism for a longer-term recovery, says Maybank Investment Bank Research.

       Thai AirAsia recently reported wider third-quarter losses of THB2.1bil resulting from a suspension of its flight operations to mitigate a third wave of the Covid-19 pandemic in the country.

       A "spectre of PN17 classification" looms over the Thai carrier, said Maybank IB, even as the Thai airline embarks on recapitalisation and restructuring initiatives.

       Consequently, Maybank IB forecasts that AirAsia may take a huge hit in the coming financial year.

       "For FY22E, our core net loss estimate is twice than before largely due to AAGB recognising the huge MYR1.1b in previously unrecognised losses from TAA," said Maybank IB.

       Over the longer-term, the research firm emphasised a swing in the group's net profit to the black in FY23, underpinned by the the decelerating rate of Covid-19 cases in the region.

       There has been a resumption of mass travel in all four of AirAsia's major markets, including Malaysia, which historically contributed 70% to 80% of group profits.

       Meanwhile, Maybank IB also noted that the Malaysian aviation industry is consolidating, which is positive for Malaysia AirAsia fares.

       "We forecast FY23E to swing to a core net profit of MYR255m from a core net loss of MYR439m before due to higher MAA fares.

       "With a profitable FY23E, we hope AAGB will no longer be classified as a PN17 listed issuer by then (if it is classified as such on 7 Jan 2022)," it said.

       Adding to the future prospects, Maybank IB said AirAsia may also list its digital assets, which will unlock a lot of value for the group.

       Given the improved outlook, the research firm upgraded AirAsia to "buy" from "sell" and raised its target price to RM1.36 from 36 sen previously.