SINGAPORE: AirAsia Bhd, Asia’s biggest budget airline, plans to raise funds at loss-making associates by issuing up to US$300mil (RM1.1bil) in bonds and may sell planes to help cut group debt, chief executive Tony Fernandes said in a letter to investors.
Fernandes, who has steered AirAsia into a billion-dollar business from a two-plane operation in 2002, said the group plans to issue as much as US$150mil in convertible bonds at each of its Philippine and Indonesian associates. It may also sell and lease back up to 20 aircraft in the group’s fleet this year, he said in the letter, of which Reuters obtained a copy.
The comments in Fernandes’ letter, sent yesterday, came days after Hong Kong-based firm GMT Research issued a report questioning AirAsia’s accounting practices. In its report, GMT said AirAsia used transactions with associate companies to boost earnings, startling investors and leading the airline’s shares to fall to a five-year intra-day low on June 12.
Though the leader among budget carriers in the world’s fastest-growing aviation market, AirAsia’s business has been squeezed in recent times by competition with regional rivals, such as Malaysia Airlines Bhd, the Jetstar unit of Australia’s Qantas Airways Ltd, Indonesia’s Lion Air and subsidiaries of Singapore Airlines Ltd.
“Some of the details here are still work-in-progress but what is written will more or less be reality,” Fernandes said in the letter. “Due to the recent movement in our share price, we are sharing the details with you earlier than planned,” he said, without making reference to the GMT report.
AirAsia, the biggest Asian customer of plane maker Airbus, reported a net loss for October-December 2014, and is taking on fewer new aircraft to manage capacity.
It has previously said it plans to list the Philippine and Indonesian associates to raise funds to develop business, but has been hit by weaker demand after a plane operated by its Indonesia affiliate crashed in December, killing all 162 people on board.
In his letter, Fernandes sought to reassure investors that business is improving.
Yesterday, AirAsia’s shares dropped 2.8%, after falling a total of as much as 18% since GMT published the report on June 10. – Reuters
