Malaysia's AirAsia says it is in talks to secure funding of more than US$230 million

Malaysia's AirAsia says it is in talks to secure funding of more than US$230 million

Air Asia's future is in doubt because of the collapse in air travel as a result of coronavirus
Air Asia's future is in doubt because of the collapse in air travel as a result of coronavirus. (AFP/Manjunath KIRAN)

KUALA LUMPUR: Malaysian budget carrier AirAsia on Thursday (Jul 9) said it was in talks to secure financing of more than 1 billion ringgit (US$235 million), a day after its auditor cast doubt on its ability to continue as a going concern due to the coronavirus-led travel slump. 

“We have been presented with proposals in various forms of capital raising, be it debt or equity, and are in ongoing discussions with numerous parties, including investment banks, lenders, as well as interested investors in seeking a favourable outcome for the group,” the airline said in a statement.

READ: AirAsia's shares plunge after auditor notes 'going concern' doubts

Some financial institutions have indicated that they would support its funding request of more than 1 billion ringgit, it said.

Of the 1 billion ringgit in funding, AirAsia’s chief executive officer Tony Fernandes said a certain portion would be eligible for the government guarantee loan under the Danajamin PRIHATIN Guarantee scheme in Malaysia.

The carrier’s Philippine and Indonesia entities are currently in various stages of applications for a bank loan, he said.

In the Philippines, AirAsia has applied for the government-guaranteed loan under the Philippine Economic Stimulus Act (PESA), with an expected positive outcome.

Meanwhile, in its 2019 Annual Audited Account statement, the group has also indicated that it planned to raise capital of up to RM1.4 billion as and when required to strengthen its equity base and liquidity and expect successful implementation on these capital-raising plans. 

tony fernandes FILE
FILE PHOTO: AirAsia boss Tony Fernandes. (AFP/MANAN VATSYAYANA)

Commenting on capital management, internally said Fernandes, the group has embarked on headcount rationalisation for leaner operations, given the current demand for air travel and expectations on recovery, with internal cost-cutting efforts to include a group-wide temporary salary reduction of between 15 per cent and 75 per cent.

“We have received deferrals from our supportive lessors and are now working on further extensions. We have also restructured 70 per cent of our fuel hedging contracts and are continuously negotiating with our supportive counterparties for the remaining exposure.”

“All in all, we expect at least 50 per cent reduction in our cash expenses in 2020,” he said.

While the first half of the year has been extremely challenging, Fernandes said countries around the world have resumed domestic travel in recent weeks and are gradually reopening international borders.

In this regard he said, the formation and discussion of “travel bubbles” and “green lanes” with key economic partners with a low infection rate and proven pandemic curbing systems, is a step in the right direction. 

AirAsia has also resumed its domestic operations in markets such as Malaysia, Thailand, Indonesia, India and the Philippines on a staggered yet steady basis since late May.

“On July 7, we registered our highest post-hibernation sale with 75,000 seats sold in a single day, reflecting pent-up demand and signalling green shoots of recovery. We also sold over 200,000 AirAsia Unlimited Passes since its recent launch for domestic Malaysia, domestic Thailand and AirAsia X. 

“Positive trends in our flight bookings and load factors are additional signals of a better second half of the year,” he said.

FILE PHOTO: AirAsia planes sit on the tarmac at Kuala Lumpur International Airport
AirAsia planes sit on the tarmac at Kuala Lumpur International Airport, Malaysia Aug 28, 2016. (Photo: Reuters/Edgar Su/File Photo)

In June, the group-wide load factor was 60 per cent with AirAsia Malaysia’s load factor reaching 65 per cent, and it expects the load factor to reach 70 per cent for July.

On the outlook, Fernandes remained confident in the growth potential of the ASEAN region, in line with ASEAN-5’s gross domestic product growth forecast of  6.2 per cent in 2021, which is one of the highest growth rates in the world.

“We are confident that AirAsia will not only benefit from this growth upturn but also contribute to the region’s recovery given the significant role that air connectivity plays in ASEAN’s trade and investment landscape,” he added.

Source: Reuters/Bernama/kv

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