Finance Ministry denies giving loan to any airline

by AFIQ AZIZ / pic by TMR FILE

THE Finance Ministry (MoF) denied a news report yesterday, which claimed budget carrier AirAsia Group Bhd had secured a government-backed loan worth RM1 billion to help the carrier financially.

Nikkei Asia, citing sources, said the loan would come from a funding scheme under the Prihatin stimulus package offered by the country’s financial guarantee insurer, Danajamin Nasional Bhd.

The facility is available through all financial institutions until Dec 31, 2020, or until the fund is fully utilised.

“The ministry would like to clarify that it has not approved any government financing or guarantee to any airline,” an MoF spokesperson stated in a short release yesterday noon.

AirAsia’s shares, which rose to a high of 69 sen in the morning trading session on the loan news, reversed course in the afternoon trading session to close one sen higher at 60.5 sen yesterday.

The news report alleged that the government had initially agreed to only half the amount before consenting to the RM1 billion sought.

One source was quoted as saying the funds will be utilised by the low-cost carrier to repay short-term loans and fund working capital.

The report further claimed that the federal government would guarantee 80% of the loan. The MoF has, however, denied the claim.

AirAsia group CEO Tan Sri Dr Tony Fernandes had in July expressed his intention to raise RM2.4 billion to ease its tight cashflow situation.

He indicated the company would source up to RM1 billion from financial institutions, while raising the remaining RM1.4 billion from equity.

The group subsequently announced in early October that its 33%-owned associate AirAsia Japan Co Ltd was ceasing operations due to highly challenging operating conditions.

Fernandes recently confirmed the company would retrench 10% of their 24,000 employees. He said the job cuts had to be undertaken as the sector’s outlook remained challenging.

In June, AirAsia reduced more than 250 of its staff due to the pandemic.

The company extended its net loss in the second quarter ended Jun 30, 2020 (2Q20), to RM992.89 million compared to RM803.55 million in the 1Q20 as most of its fleets were grounded for much of the year.

The global aviation industry is one of the hardest-hit by the Covid-19 pandemic after nations imposed travel bans which have driven airline losses to billions of dollars.

In July, the International Air Transport Association (IATA) released an updated global passenger forecast showing the recovery in traffic has been slower than had been expected.

IATA said the global passenger traffic would not return to pre-Covid-19 levels until 2024, a year later than previously projected.

For 2020, global passenger numbers are expected to decline by 55% compared to 2019, worse than the April forecast of 46%.

IATA said passenger numbers are expected to rise 62% in 2021 of the depressed 2020 base, but will still be down almost 30% compared to 2019.

A full recovery to 2019 levels is not expected until 2023, one year later than previously forecast.

AirAsia’s shares rose 1.68% or six sen to 60 sen yesterday, valuing it at RM2.02 billion.