AirAsia refutes reports it is writing-off dues from two units

09 July 2009

PETALING JAYA: There will be no write-offs on the amount owed by Thai AirAsia (TAA) and Indonesia AirAsia (IAA) to parent AirAsia Bhd, said AirAsia group chief executive officer Datuk Seri Tony Fernandes.

This is in contrast to what some analysts are saying in their reports, which have suggested a possible write-off of RM603mil, of which RM248mil is from TAA and RM355mil from IAA.

As at Dec 31, 2008, IAA and TAA owed RM974mil and RM457mil to AirAsia respectively, while the amount owed by AirAsia to IAA and TAA was RM619mil and RM209mil respectively. Net borrowings due to AirAsia are RM603mil.

“A draft agreement is being prepared to ratify and seek approval from AirAsia shareholders at an EGM to be called on Aug 3 for the past and continuing financial assistance to the two units,’’ Fernandes told StarBiz.

This is necessary since the amount owed by the two 49%-owned associates exceeds the 5% threshold of AirAsia’s shareholders’ funds which stand at RM1.81bil.

TAA and IAA have paid-up capitals of 400 million baht and 180 billion rupiah respectively.

AirAsia has been funding the two associates since they began operations and the unwinding of fuel hedgings has had an impact, thus raising the level of their borrowings.

AirAsia, unlike many other airlines, decided to end its hedges when fuel price headed south.

Fernandes said the two units were now cash-flow positive and that they had been paying back some of their dues, but noted that it would take two to three years for them to fully pay their dues to AirAsia.

Things are looking much better since the group embarked on a change in the aircraft type and expanded routes.

“If anything, the losses in the recent past were also small and incurred due to geopolitical and market conditions,’’ Fernandes said.

“Our Indonesian operations are enjoying brisk sales as IAA is now flying to more international routes, especially to Singapore and Australia. Our Bali hub is also performing way above expectations. We are very bullish on both the countries and Indonesia is turning out to be politically stable.’’

The change in aircraft type was from B737 to A320, which is more fuel efficient.

“It is a turnaround story and by 2010, all the B737 aircraft will be replaced with the A320 and we will have phenomenal cashflow and benefit from this move,’’ Fernandes said.

Thai AirAsia has 14 aircraft (nine A320s and five B737s) while Indonesia AirAsia has 11 (seven A320s and four B737s). All these aircraft are leased from AirAsia.

“This year, TAA will get four more new A320s and IAA seven more and that allows them to expand further,’’ Fernandes said.

Part of the dues from the associates to AirAsia is from the cost of leasing the aircraft for their respective operations.