AirAsia Group in trouble: Is the business sustainable?

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Thai Airways International and Virgin Australia Holdings have entered bankruptcy protection due to their inability to pay creditors.

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AirAsia triggers criteria, but will not be classified as PN17 company for next 12 months

Muhammed Ahmad Hamdan/theedgemarkets.com
July 08, 2020 15:31 pm +08

KUALA LUMPUR (July 8): AirAsia Group Bhd has triggered the prescribed criteria of Practice Note 17 (PN17), which involves financially distressed companies, under Bursa Malaysia’s Main Market Listing Requirements.

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 are three criteria of PN17 which have been temporarily switched off by Bursa during the relief period, including a material uncertainty relating to going concern (MUGC) highlighted by the company’s auditors.

“AirAsia’s external auditors, Messrs Ernst & Young PLT, have issued an unqualified audit opinion with emphasis of matter on MUGC in respect of the group’s audited financial statements for the financial year ended Dec 31, 2019 and its shareholders’ equity on a consolidated basis is 50% or less of its share capital, excluding treasury shares,” the group said.

“For the avoidance of doubt, AirAsia will not be classified as a PN17 listed issuer and will not be required to comply with the obligations pursuant to Paragraph 8.04 and PN17 of the Main Market Listing Requirements for a period of 12 months from the date of this announcement,” it added.

The budget airline, whose business operations have been badly hit by the Covid-19 pandemic, said it will reassess its condition and announce whether it continues to trigger any of the criteria of PN17 upon the expiry of 12 months from the date of this announcement.

AirAsia’s securities trade has been halted from 9am today following amendments made to notes accompanying its first-quarter results.

This is to include its auditors’ unqualified opinion statement with an emphasis of matter on material uncertainty relating to AirAsia’s status as a going concern in view of the current economic condition and Covid-19 pandemic.

Trading of AirAsia’s shares resumed with effect from 2.30pm today. As at 3.06pm, shares in AirAsia fell nine sen or 10.53% to 76.5 sen apiece, valuing it at RM2.86 billion. Some 91.12 million shares were traded, almost three times its 200-day average trading volume of 34.63 million shares.

Accordingly, trading of the structured warrants relating to AirAsia also resumed at the same time.

https://www.theedgemarkets.com/article/airasia-group-bhd-triggers-criteria-will-not-be-classified-pn17-next-12-months#.XwVnMDpQI4Y.twitter

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KUALA LUMPUR (BLOOMBERG, REUTERS) – AirAsia Group Bhd shares slumped nearly 18 per cent when trading resumed on Wednesday (July 8) following a suspension that came as auditor Ernst & Young said the carrier’s ability to continue as a going concern may be in “significant doubt.”

The budget airline pared its loss to 12 per cent as of 2:47pm local time. Trading was halted on Wednesday until 2:30pm.

In a statement to the Kuala Lumpur stock exchange, Ernst & Young said AirAsia’s current liabilities already exceeded its current assets by RM1.84 billion (S$600 million) at the end of 2019, a year when it posted a RM283 million net loss. That was before the coronavirus crisis, which has further hit the carrier’s financial performance and cash flow.

The slump in air travel and poor financial performance “indicate existence of material uncertainties that may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern,” Ernst & Young said in its unqualified audit opinion statement.

In response, AirAsia said in an exchange filing on Wednesday that Ernst & Young’s statement and a decline in shareholder equity triggered the criteria for a so-called Practice Note 17, which applies to financially distressed companies. However, the airline won’t be classified as PN17 as the Malaysian exchange suspended application of the status from April through June next year as part of relief measures in light of the coronavirus pandemic.

Covid-19 plunged the aviation industry globally into crisis as border controls and health concerns vaporized demand for air travel. AirAsia on Monday reported a record quarterly loss of RM803.8 million. It wasn’t until late March and the end of the quarter that the budget airline suspended flights.

“This is by far the biggest challenge we have faced since we began in 2001,” AirAsia’s chief executive officer Tony Fernandes said in a statement on Monday.

He said the carrier is in talks for joint-ventures and collaborations that may result in additional investment, and it has also applied for bank loans and is weighing proposals to raise capital.

Last month, South Korean conglomerate SK Group said it was reviewing a proposal to buy a small stake in the airline. In May, AirAsia sent a memo to Malaysian banks seeking to borrow RM1 billion, people familiar with the matter said at the time.

AirAsia needs at least RM2 billion  this year to stay afloat, according to K. Ajith, an aviation analyst at UOB Kay Hian in Singapore.

“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.

https://www.straitstimes.com/business/companies-markets/future-of-airasia-in-significant-doubt-auditor-ernst-young-warns

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Bursa to temporarily suspend PN17 and GN3 classifications

Muhammed Ahmad Hamdan/The Edge Financial Daily
April 17, 2020 07:58 am +08

KUALA LUMPUR: In view of the current trying time, the Securities Commission Malaysia (SC) chairman Datuk Syed Zaid Albar announced that Bursa Malaysia will temporarily suspend Practice Note 17 (PN17) or Guidance Note 3 (GN3) classification on companies which financial positions slip into the status.

“We have already allowed PN17 and GN3 companies up to 24 months to regularise their financials.

“So, moving forward, in addition to this, after a discussion with Bursa, Bursa will provide companies listed on the Main Market, temporary relief from the PN17 classification in relation to certain criteria,” said Syed Zaid. The temporary relief also applied to GN3 for ACE Market-listed companies.

https://www.theedgemarkets.com/article/bursa-temporarily-suspend-pn17-and-gn3-classifications

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