AirAsia may have to look for private financial support to stay afloat

KUALA LUMPUR: AirAsia Group Bhd may have to look for non-government means of financial help to stay afloat after the Ministry of Finance (MoF) dismisses reports that the low-cost airline has secured a large loan from it.

Nikkei Asia yesterday reported that AirAsia had secured a RM1 billion loan from the government via the ministry as it continued to grapple with the impact of the Covid-19 pandemic.

The RM1 billion would be 80 per cent-guaranteed by the MoF and disbursed by a group of local banks under the government’s RM50 billion Danajamin Prihatin Guarantee Scheme (DPGS), according to Nikkei Asia, quoting sources from the ministry and the airline.

The report said the disbursement was expected next month and would be used by AirAsia to repay short-term loans and for working capital.

The New Straits Times could not get comment from AirAsia founder and group chief executive officer Tan Sri Tony Fernandes at the time of writing.

The MoF later issued a brief statement, denying approving such loan.

“We would like to clarify that it (MoF) has not approved any government financing or guarantee to any airline,” said an MoF spokesperson.

Danajamin Nasional Bhd is the country’s first financial guarantee insurer providing the DPGS as part of the Prihatin economic stimulus package introduced by Prime Minister Tan Sri Muhyiddin Yassin.

The facility is available through all financial institutions until December 31, 2020 or until the fund is fully utilised.

Market observers said airlines should be compensated by the government if they were asked to continue serving the nation with air connectivity, despite the incurrence of losses

“This is fair to the carriers who would be flying for national service instead of commercial motives, and should also ensure continuity of services, albeit at a cost to the government.

“Routes carried out by the carriers which are profitable, however, should not enjoy any remuneration by the government,” an industry expert told the NST.

In the longer term, he said if the government presumably would be less willing to fund any losses by the carriers, market forces should be allowed in.

“A successful and profitable carrier will carry on, without needing government’s support, while any carrier which has proven to be inefficient and not able to raise funding from the capital markets should be allowed to go bust,” he said.

Foreign carriers too will likely take up any market share released by any exiting carrier, in the case of international routes,” he added.

Meanwhile, AirAsia also reportedly will be embarking on another retrenchment involving 400 employees in all divisions next month.

Fernandes previously said AirAsia had reduced more than 10 per cent of its 24,000 workforce.

It was reported that the airline had laid off over 2,400 employees since Malaysia’s borders were closed on March 18 this year.

The last round of retrenchment involving cabin crew and pilots ended last week.

AirAsia had also planned to downsize its fleet of aircraft and is currently awaiting to return some of its aircraft to its lessors.

The airline is also in discussion with Airbus to revisit its aircraft orders involving A320 and A321 aircraft as well wide-body A330.

It was reported that Fernandes had planned to reduce AirAsia’s fleet to 180 aircraft by the end of 2021 from the current 245.

AirAsia shares rose 1.7 per cent or one sen to close at 61 sen with 121.55 million shares traded yesterday, giving a market capitalisation of RM2.02 billion.

Source: NST