KUALA LUMPUR: AirAsia Group Bhd is in talks to raise more than RM1 billion capital either from debt or equity sale amid concerns over its status as a going entity.
Group chief executive officer Tan Sri Tony Fernandes said the low-cost carrier (LCC) had received indications from certain financial institutions to support its request for more than RM1 billion fund.
"We are in ongoing discussions with numerous parties, including investment banks, lenders, as well as interested investors in seeking a favourable outcome for AirAsia," he said in a statement today.
"Of this debt funding, a certain portion would be eligible for the government guarantee loan under the Danajamin PrIhatin Guarantee Scheme in Malaysia," he said.
Yesterday, AirAsia's external auditor Ernst & Young PLT issued an unqualified audit opinion, emphasising significant uncertainties with respect to the LCC's ability to continue as a going concern due to Covid-19.
As of March 31 this year, AirAsia Group had a net cash position of RM1.1 billion.
However, its cash evaporated at fast rate as most of its assets were grounded due to travelling restrictions.
Fernandes said AirAsia's subsidiaries in the Philippine and Indonesia were also in various stages of bank loan applications.
"In the Philippines, we have applied for the government guaranteed loan under the Philippine Economic Stimulus Act, with an expected positive outcome," he said.
Fernandes said AirAsia had taken significant measures internally as a group during the hibernation period, while reaching out externally for assistance to ensure its working capital remains intact.
"Internally, we have embarked on headcount rationalisation for leaner operations, given the current demand for air travel and expectations on recovery," he said.
He noted that AirAsia's internal cost-cutting efforts 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," he said.
Above all, Fernandes said the group expected to achieve at least 50 per cent reduction in its cash expenses in 2020.
He said the mitigating actions it had implemented as well as consistency in transforming the company would help it recover.
Fernandes said the first-half (1H) of 2020 had been extremely challenging but in recent weeks, countries globally had resumed domestic travel and gradually reopening international borders.
This was in recognition that air transport provided the connectivity that was essential for the resumption of economic activities.
AirAsia 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, was a step in the right direction.
"As domestic travel is now allowed in Malaysia, Thailand, Indonesia, India and the Philippines, we have been resuming our flights on a staggered yet steady basis since late May.
On July 7, AirAsia Group registered its 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 Bhd.
"Positive trends in our flight bookings and load factors are additional signals of a better second half of the year."
In June, AirAsia's group-wide load factor was 60 per cent with its local load factor reaching 65 per cent.
AirAsia expects to achieve a higher load factor of 70 per cent in July, despite tripling its capacity month-on-month to cater to the increased demand.