JAKARTA (TheInsiderStories) – The ability of AirAsia Berhad to continue its business is increasingly in doubt, amid the debt and the impact of COVID-19 that hit the Malaysian and global aviation sector. This was revealed by global auditor Ernst & Young (EY) in a statement on Wednesday (07/08).
In its presentation, the independent body revealed that there was a “very big doubt” about the business prospects of the aviation company. This is related to the airline liabilities that have exceeded their current assets of RM1.84 billion (US$431.92 million) at the end of 2019.
Because of this condition, AirAsia share trading was also suspended by Bursa Malaysia. EY said, that the airlines had a net loss of RM283 million as of December 2019. In early 2020, the global economy, especially the commercial aviation industry, faced uncertainty as a result of the unprecedented COVID-19 pandemic,
“Travel restrictions imposed by countries around the world have caused a significant reduction in demand for air travel which has an impact on the financial performance and cash flow of the group,” wrote EY.
The agency said the combination of these conditions was an indication of uncertainty that could raise significant doubts about AirAsia and the company’s ability to continue business.
“The airline’ recovery depends on government policies regarding travel, discussions with financial institutions, and investors and its ability to overcome liability issues,” said Ernst & Young.
However, EY continued, with easing restrictions on interstate travel and tourism activities, AirAsia has seen positive developments in operations due to the trend in passenger seat reservations. Flight frequencies are gradually improving to meet the increasing demand, the research said.
“This condition is the biggest challenge we have faced since we started operating in 2001,” the company’s CEO Tony Fernandes said in an official statement this week.
The flight carrier currently exploring joint ventures and collaborations that can generate additional investment and also have applied loans to the banks. AirAsia is also considering a proposal to increase the company’ capital.
Reportedly, Fernandes is ready to sell 10 percent of his ownership in order to get fresh funds. Three South Korean conglomerates, led by SK Corp., are declared to be absorbing the new shares. This corporate action is predicted to attract funds of up to US$78.4 million.
AirAsia based in Kuala Lumpur and is the largest private airline in Malaysia. The company has flown to Indonesia, Saudi Arabia, Sepang, Thailand, Singapore and Vietnam.
The airlines was established on Dec. 20, 1993. But then it operated as AirAsia in 2001 after it was bought by Fernandes and his partner, from its old Malaysian owner DRB-Hicom, for a RM1 with a $11 million debt.
The company now has Airbus A320 242 units, Airbus A321 Neo 2 units, Airbus A330 32 units, a total of 276 Airbus units.
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