Future of Air Asia called into doubt by auditors

  • Future of Air Asia called into doubt by auditors

Future of Air Asia called into doubt by auditors

KUALA LUMPUR, July 9 ― low-priced 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.

The airline was already facing stiff competition from other low-priced carriers before the outbreak and had reported a net loss of 283 million ringgit a year ago. An unqualified opinion indicates the auditor believes a company has prepared its statements fairly.

AirAsia said on Monday joint ventures and collaborations were being considered that might result in additional third-party investments in specific segments of its business.

Ernst & Young made the observation in an unqualified audit opinion on AirAsia's earnings for 2019 that was released late on Tuesday.

Fernandes said its Philippine and Indonesia entities were now in various stages of applications for a bank loan.

Fernandes said the coronavirus was "by far the toughest challenge we have faced since we began in 2001". "In May, AirAsia sent a memo to Malaysian banks seeking to borrow 1 billion ringgit ($233 million)", Bloomberg reported. Most foreign assets fall under commercial, meaning that the assets are expected to deliver returns of 3 percentage points above Malaysia's inflation on a five-year rolling basis.

The group, however, will not be classified as PN17, in line with the PN17 relief measures implemented by Bursa from April 17 this year until June 30, 2021, the budget airline said in an exchange filing today.

"There's not a lot of options, and the best one could be the government stepping in but seeking a rights offering by the company in exchange", he said.

"The company is among a handful of notably fragile carriers burdened by higher-than-average liabilities even for the industry", Luya You, an analyst at Bocom International, said.

Despite the warnings, there are signs of improvement with the gradual lifting of restrictions on interstate travel.

Fernandes pointed out that countries around the world have resumed domestic travel and were gradually reopening worldwide borders in recognition that air transport provided the essential connectivity for the resumption of economic activities in recent weeks.

Founder Tony Fernandes, who also co-owns Queens Park Rangers football club in the United Kingdom, acknowledged problems, but said they would be overcome.

"We would never say that we would never exit India", Fernandes was quoted as saying in a Credit Suisse report. AirAsia Group's India JV is undertaken via AirAsia (India) Ltd under a partnership with Tata Sons Private Ltd.

In Malaysia, the group is targeting a bailout of around RM 1 billion ($234 million), of which at least some will be eligible for government support under the Danajamin Prihatin Guarantee Scheme.

AirAsia's shares are down 55% this year, giving it a market capitalisation of around $594 million.