PETALING JAYA: AirAsia Group Bhd said it is taking steps to weather the financial crunch it is going through even as its external auditors Ernst & Young raised concerns about the company’s financial statements for the financial year ended Dec 31,2019 (FY19).
In an announcement to Bursa Malaysia, the auditors issued an unqualified audit opinion due to material uncertainty relating to going concern, in view of the current economic condition and the Covid-19 pandemic.
“We draw attention to Note 2.1 and Note 48 to the financial statements, which indicate that the group has a net loss of RM283mil for the financial year ended Dec 31,2019 and the current liabilities exceeded its current assets by RM1.843bil, ” the statement to Bursa Malaysia said.
“Further, in early 2020, the global economy, in particular the commercial airlines industry, faces uncertainty as a result of the unprecedented Covid-19 pandemic, ” it added.
Among the measures AirAsia has implemented include resuming operations on a staggered basis in June 2020, said the airline.
It said in note 48 of its audited financial statements for the FY19 that it has seen positive developments on its business operations as passenger seat booking trends, flight frequencies and load factors are gradually improving to cater for the increasing demand.
“The group expects the business operations to gradually return to normal operations level by early 2021, ” AirAsia said.
“Nonetheless, the overall timing of recovery of the Covid-19 pandemic would affect the ability of the group to meet its forecast revenue, which in turn affects the group’s cashflow generated from operations, ” it said.
In terms of funding, the group said that its existing lenders have provided support through the rollover of its facilities.
“In Malaysia, certain financial institutions have indicated their willingness to support the group’s request for funding with amounts of up to RM1bil, of which certain amount is eligible for the government guarantee loan that will be provided under the Danajamin Prihatin Guarantee Scheme and the outcome is expected to be favourable, ” it said.
AirAsia said its subsidiaries in the Philippines and Indonesia have also applied for bank loans from their respective existing and new lenders and are on various stages of application.
It said operations in the Philippines is expected to obtain funding through the government guaranteed loan under the Philippine Economic Stimulus Act, which is expected to be passed as law in September 2020.
“The group plans to raise capital of up to RM1.4bil as and when required to strengthen its equity base and liquidity and expects a successful implementation on these capital raising plans, ” it said.
It said that it had also managed to seek deferrals for payment of aircraft operating leases with lessors and had restructured fuel hedges exposures with certain counterparties to reduce its fuel hedging losses.
“The group is currently in the process of negotiating a further waiver or deferral of lease rentals and restructure the remaining fuel hedge exposures with supportive lessors and counterparties, ” it said.
Airasia anticipates a strong rebound in demand for air travel given the gradual increase in passenger seat bookings, flight frequencies and load factor during the progressive upliftment of travel restriction.
The group has seen positive developments on its business operations as passenger seat booking trends, flight frequencies and load factors are gradually improving to cater for the increasing demand, the auditors said and acknowledged.
“The financial statements of the group have been prepared on a going concern basis, the validity of which is dependent on successful recovery from the Covid-19 pandemic in conjunction with the actions undertaken by the government of the respective countries, ” it said.
The auditors added that the favourable outcome will also depend on the ongoing discussions with financial institutions and investors to obtain required funding and the successful implementation of the management’s plans for future actions in responding to the conditions stated above.
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