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RM300m SDB lifeline for AirAsia?
Published on: Friday, October 23, 2020
By: NST
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AirAsia Group Bhd is believed to have secured a RM300 million loan from Sabah Development Bank Bhd (SDB) to keep it afloat amid the Covid-19 pandemic.NSTP/EMAIL.
Kuala Lumpur: AirAsia Group Bhd is believed to have secured a RM300 million loan from Sabah Development Bank Bhd (SDB) to keep it afloat amid the Covid-19 pandemic.

Market observers who spoke on condition of anonymity said the low-cost carrier (LCC) would likely use the loan to finance its local operations including paying employees salaries and aircraft leasing.

AirAsia Malaysia chief executive officer Riad Asmat confirmed that a loan had been approved and disbursed, but did not disclose specifics including the lender and amount involved.

“This loan is part of the capital raising exercise by AirAsia group, which is moving in the right direction and we are pleased with the progress,” he said when contacted by the New Straits Times (NST).

Market observers said the loan would likely last up to two months as substantial financial relief would be needed to sustain AirAsia’s operations over the long-term if the Covid-19 continues to rage.

“Although it won’t last very long, the loan would be a helpful lifeline. AirAsia is hugely important to Sabah for bringing in tourists. Therefore, SDB would be very interested in helping AirAsia to survive,” a source told the NST.

SDB serves as the Sabah government’s financial intermediary.

It also provides advisory services to the state government as well as its agencies with project financing and investment matters, while managing the surplus funds and its related agencies.

Since the emergence of Covid-19 in early 2020, demand for air travel has been hampered and exacerbated by international borders closures. This has taken a heavy toll on most airlines’ operations globally.

Previously, it was reported that AirAsia had secured a RM1 billion loan from the government.

The RM1 billion would be 80 per cent guaranteed by the Finance Ministry and disbursed by a group of local banks under the government’s RM50 billion Danajamin Prihatin Guarantee Scheme, according to Nikkei Asia, quoting sources from the ministry and the airline.

However, the Ministry of Finance (MoF) had on October 13 denied approving such loan.

“We would like to clarify that it has not approved any government financing or guarantee to any airline,” an MoF spokesperson said then.

Another source said the ministry might have denied approving the loan but that it did not say it would not help AirAsia.

“They did not say they won’t help the airline, but rather they haven’t helped yet,” he said.

The downturn in air travel caused by the pandemic has prompted AirAsia and its affiliates to seek funding, restructure or cease operations.

The airline reportedly said it would embark on another retrenchment involving 400 employees in all divisions next month.

AirAsia founder and group chief executive officer Tan Sri Tony Fernandes said the company had reduced more than 10 per cent of its 24,000 workforces.

It was reported that the airline had laid off over 2,400 employees since Malaysia’s borders were closed on March 18 this year.

The last round of retrenchment involving cabin crew and pilots ended in early October.

AirAsia had also planned to downsize its fleet of aircraft and was awaiting to return some of its aircraft to its lessors.

The airline was also said to be in discussion with Airbus to revisit its aircraft orders involving A320 and A321 aircraft as well wide-body A330.

It had planned to reduce its fleet to 180 aircraft by end-2021 from the current 245.



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