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Jakarta Post

$598m funding more than enough for AirAsia: Tony Fernandes

$598m funding more than enough for AirAsia: Tony Fernandes AirAsia Group CEO Tony Fernandes speaks at a press conference in Sydney on March 12, 2015. (AFP/Peter Parks)
Royce Tan
Petaling Jaya, Malaysia   ●   Fri, August 21, 2020 2020-08-21 10:41 268 6657ac82168da9fa101c8a4066f795a3 2 Business AirAsia,tony-fernandes,aviation,low-cost-carrier,Malaysia-Airlines,COVID-19,Asia-News-Network Free

Like most airlines across the globe, AirAsia Group Bhd is going through a tough time navigating out of the economic turbulence brought about by the coronavirus (COVID-19) pandemic.

It was nothing short of a nightmare when it had to ground 95 percent of its fleet at the peak of the pandemic in March which saw travel restrictions worldwide.

The cash-strapped low-cost carrier now needs to raise around 2 billion Malaysian ringgit (US$478.81 million) for it to be able to see through 2021.

Earlier this month, StarBiz reported that AirAsia has secured a financing package of 1 billion ringgit that it can withdraw over time, put together by a consortium of local banks, according to industry sources.

Bounded by confidentiality obligations, AirAsia chief executive officer Tan Sri Tony Fernandes declined to comment on the matter, but said that the government has been very supportive.

“It knows that airlines are probably the most affected along with the hotel industry and there’s the Danajamin loan which AirAsia is applying for.

“I can say that we’ve made very good progress in both the loan side and in raising equity.

“Hopefully in the next two months or so we can announce something positive but it’s looking very good and it secures the future for AirAsia and the 24,000 jobs that are linked to the group, ” he said during a Facebook live session, hosted by prominent journalist Datuk Seri Wong Chun Wai.

Fernandes added that a funding of 2 billion to 2.5 billion ringgit would be more than enough and his target was to have enough cash to last AirAsia until the end of 2021.

He pointed out that the airline was also receiving tremendous support from its lessor and bank counterparties for its fuel hedge.

“If you take those two mechanisms out and with our cash flow, we’re just about breakeven.

“With those two capital raising exercises, we’re good for a long time, ” he said.

Fernandes also declined to talk on another news report which stated that AirAsia may sell 10 percent of its shares to a South Korean entity, only saying that the group is doing equity raising as well.

Wong, who is also the adviser of Star Media Group Bhd, raised another question on complaints by travellers on the request for refunds, to which Fernandes called for a bit of patience for AirAsia to get its business and cash back to where they were.

“We’ve lost four months of cash and averagely in the quarter we could do 3 billion to 4 billion ringgit (in revenue).

“My number one job is to pay the salaries of my staff and my number two job is to (ensure AirAsia) stays alive.

“We’re asking for patience from our customers to give us time to recapitalize to get our cash back, we’ll pay them bonuses for their problems

“If we pay all the refunds now, we may not exist. We need the loan, we need the liquidity to come in.

“It’s not that I’m trying to cheat anyone or run away from obligations. We will give you much more for the money that you have put in there, ” he said, adding that 80 percent of the customers have opted for a credit shell and AirAsia is working on it for the credit to be allowed for other products like hotels or food deliveries.

Having to make his staff redundant was something incredibly tough for Fernandes, something he has not done in 18 years and he is committed to getting the airline back on its feet so the group can rehire as many of them as possible.

Wong also brought up the topic of a research note on AirAsia’s sister company AirAsia X Bhd that was issued by CGS-CIMB Research with an unprecedented target price of zero sen.

While Fernandes found no issue with the target price since the market is fair, he said the report was uncalled for as some of the comments have hurt many people in the company.

He deemed it disrespectful to the 2,000-strong staff that have worked very hard.

“It’s not their fault that COVID-19 is around. It’s not their fault that Malaysia Airlines have received so much government support for the last 18 years that they were able to compete with AirAsia X.

“They did a great job. AirAsia X has carried over 100 million people to places they have never thought of going and it has brought a lot of economic benefits to Malaysia.

“We’re battling hard against lots of obstacles and it’s tough. We’ll fight through, we have a great board of directors and I’m very optimistic of AirAsia X.

“Reports like that motivates me tremendously. I’m not someone who gets angry or sore. I read that, I take it in and I say well, let’s show him a thing or two, ” Fernandes said.

This article appeared on The Star newspaper website, which is a member of Asia News Network and a media partner of The Jakarta Post