KUALA LUMPUR, July 9 ― Low-cost carrier AirAsia Group Berhad (AAGB) said today it is confident it can continue being in business despite significant uncertainties with respect to the company’s ability to continue following the Covid-19 pandemic.
Saying the first half of 2020 was extremely challenging, its chief executive Tan Sri Tony Fernandes said its management has worked ensure the sustainability of its business operations and determined to move forward in the new normal with renewed confidence of its stakeholders.
“In conclusion, the impact of Covid-19 pandemic on the Company is never taken lightly, as does the trust and support put into us.
“We are positive that the proactive mitigating actions we have implemented as well as our consistency in transforming the Company would aid us in recovering and overcoming this operating environment.
“In times of difficulties lies opportunities. We have weathered many crises and emerged stronger. We won’t waste this crisis and we will come out stronger,” he said in a statement here.
This follows after AirAsia’s external auditors, Messrs Ernst & Young PLT (E&Y) issued an unqualified audit opinion with an emphasis of matter on material uncertainty relating to going concern in respect of the company’s audited financial statements for the financial year ended December 31, 2019.
Fernandes pointed out that countries around the world have resumed domestic travel and were gradually reopening international borders in recognition that air transport provided the essential connectivity for the resumption of economic activities in recent weeks.
He also lauded the formation and discussion of “travel bubbles” and “green lanes” with key economic partners with a low infection rate and proven pandemic curbing systems, calling it a step in the right direction.
With domestic travels allowed to resume, Fernandes said AirAsia have been resuming flights on a staggered yet steady basis since late May with large-scale promotions and sales campaigns launched in support of governments’ efforts to revive domestic tourism and stimulate economic recovery.
“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. In June, our group-wide load factor was 60 per cent with AirAsia Malaysia’s load factor reaching 65 per cent,” he said, adding that the low-cost carrier is expecting to achieve a higher load factor of 70 per cent in July.
Fernandes also took the opportunity to provide the latest business updates in terms of funding and working capital management of the company.
He said AAGB have been presented with proposals in various forms of capital raising, be it debt or equity and were in ongoing discussions with numerous parties such as financial institutions as well as interested investors in seeking a favourable outcome.
“We understand the importance of shoring up our liquidity to ensure sufficient cash flow. We have received indications from certain financial institutions to support our request for funding, amounting to more than RM1 billion.
“Of this debt funding, a certain portion would be eligible for the government guarantee loan under the Danajamin Prihatin Guarantee Scheme in Malaysia. Other than Malaysia, our Philippines and Indonesia entities are currently in various stages of bank loan applications,” he said.
In another matter, Fernandes also said AAGB took significant measures internally as a group while also reaching out externally for assistance to ensure it’s working capital remains intact during the hibernation period.
“Internally, we have embarked on headcount rationalisation for leaner operations, given the current demand for air travel and expectations on recovery. Internal cost-cutting efforts include a group-wide temporary salary reduction of between 15 to 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,” he said, adding that AAGB expects at least 50 per cent reduction in cash expenses this year.
On July 7, external auditor E&Y had said in a statement that the group had a net loss of RM283 million for the financial year which ended on December 31, 2019 and its current liabilities exceeded its current assets by RM1.84 billion.
E&Y subsequently issued an unqualified opinion on AAGB’s ability to continue and its related material uncertainty.
Following that, AAGB said it triggered the prescribed criteria of the Practice Note 17 (PN17) of the Main Market Listing Requirements of Bursa Malaysia but will not be classified as such under the PN17 relief measures, citing a Bursa’s letter dated April 16 which granted affected listed issuers relief from complying with the obligations due to PN17 relief measures from April 17 to June 30, 2021.
The public trading for AGGB was also briefly suspended by Bursa Malaysia yesterday but resumed after mid-day, with share price tumbling more than 17 per cent in its biggest daily fall.