KUALA LUMPUR: Capital A Bhd has proposed for a capital reduction of up to RM6 billion as part of its plan to regularise its financial condition.
In a filing with Bursa Malaysia, Capital A said the exact quantum of share capital to be reduced is dependent on the accumulated losses and resultant issued share capital of the company.
"The proposed regularisation plan serves to regularise the financial condition of the group in order to address and uplift the PN17 status of the company.
"The purpose of the proposed capital reduction is to reduce the accumulated losses of the company to the extent possible with a view to rationalise the balance sheet of the company to reflect more accurately the value of its underlying assets and thus the financial position of the company," it said.
Capital A added that the reduced accumulated losses will also facilitate the enhancement of the credibility of the group with its bankers, customers, suppliers, investors and other stakeholders as well as provide a stronger platform for its future growth.
"Post completion of the proposed corporate exercises, the group would no longer be required to consolidate the consolidated net liabilities of AirAsia Aviation Group Ltd and AirAsia Bhd, allowing Capital A to be in better financial footing," it said.
It added that the disposal of the entire equity of AirAsia Aviation and AirAsia is in line with the Capital A's strategic direction to focus on business activities that it identified as viable, profitable and/or having growth potential.
This includes Capital A Aviation Services (comprising aviation MRO service under ADE and flight catering under Santan), logistics service under Teleport, digital business under Move Digital (primarily comprising online travel agency platform under AirAsia Move and financial technology services under BigPay) as well as brand and intellectual property company under Brand AA.
The company also said it had taken active steps to regularise and improve its financial condition prior to its proposed regilarisation plan.
Since the pandemic, Capital A has undertaken major cost control measures including right sizing of manpower, salary cuts for management, staff and directors, re- negotiation of contracts with aircraft lessors, suppliers and partners, and restructuring of fuel hedging positions, which had significantly reduced the cash burn rate.
It also implemented continuous improvements to flight capacity and network revenue management in response to the progressive uplifting of travel restrictions by the respective countries coupled with active fleet management, consistent monitoring of routes profitability and optimisation of load factors of its flights.
As at Sep 30 this year, the group had taken 200 aircraft out of storage; out of which the group is operating 187 aircraft.
"The group was operating 196 aircraft immediately prior to the pandemic," it said.
Outlook for Capital A's core verticals
The company said the future direction of its core verticals include the expansion of Asia Digital Engineering (ADE) total base maintenance lines to 16 by year-end.
ADE intends to increase further the number of hangar lines under its operation to 20 by the end of 2026, in addition to developing new workshops, all of which will be used to service AirAsia aircraft and other third-party airlines.
Capital A expects that Santan's core business of inflight catering service will continue to grow with the expected growth in the aviation and tourism industry.
Santan will grow its revenues as it intends to charge TAA for its airline catering service beginning January 2025.
In addition, Santan is applying for an inflight license to serve third party airlines starting in Malaysia.
While waiting for the licence approval, Santan will be using its expertise to offer inflight services to bus and train operators.
In the longer term, Santan also intends to expand its customer base for frozen and ready-to-eat food by targeting hotels and food and beverage service providers.
Meanwhile, the group expects that AirAsia Move's unique transacting users in Southeast Asia, particularly in Malaysia, Thailand, the Philippines and Indonesia will grow in line with the growing airline industry in Southeast Asia.
As for Teleport, Capital A plans to expand its business by leveraging on AirAsia's extensive air network, the capacity provided by its own three recently inducted freighters as well as numerous strategic partnerships with other airlines.
Teleport aims to become a major integrated e-commerce logistics solution provider and partner.
"Teleport has set a target to deliver two million parcels daily by the end of 2025, from 170,000 daily in the first half of 2024. To serve this volume, Teleport will expand its capacity, not just through AirAsia belly space, but also through additional third party airline capacity via Air Partners.
"Teleport Group's key advantage is AirAsia's extensive air network and the ability to combine it with complementary freighter and Air Partners capacity to extend network reach and service offering," it said.
Meanwhile, Brand AA plans to leverage on the intellectual properties built within the group to create new co-branding and business opportunities.
Brand AA intends to strategically expand beyond the AirAsia Brand into the general retail landscape through brand partnerships, acquisition and merchandising, which are expected to fuel its continued growth.