AirAsia defends employee share grant scheme, share options as 'sustainable alternative' to reward talent while conserving cash

(Photo by Mohd Suhaimi Mohamed Yusuf/The Edge)

(Photo by Mohd Suhaimi Mohamed Yusuf/The Edge)

-A +A

KUALA LUMPUR (March 29): AirAsia Group Bhd today defended its proposed long-term incentive scheme (LTIS), which includes a share grant scheme (SGS) for selected senior employees, as a “sustainable alternative” to help the group retain talent while conserving cash.

In a statement today, AirAsia said the LTIS, comprising the SGS and the employee share option scheme (ESOS), is an industry norm that it had proposed in recognition of contributions made by employees throughout the Covid-19 pandemic.

This is in light of the difficulty faced by the company to reward its employees “in the traditional manner with appropriate cash and bonus payments”, said AirAsia Group head of people and culture PK Medappa.

“Allstars will always come first. They have suffered financially due to the Covid-19 pandemic, and still shown loyalty towards the company,” it said, referring to its employees, citing a salary sacrifice scheme of between 15%-100% it established in March last year as part of the group’s cost containment and cash conservation exercise.

“We therefore want to reward these employees in a manner that aligns the upside to shareholder value creation to wealth creation opportunities for the Allstars,” Medappa said.

AirAsia's statement came following a March 22 report by UOB Kay Hian, which the airline slammed as misleading. In particular, it referred to a section of the report that questioned AirAsia’s proposal to issue the SGS at no cost to key executives when the airline was facing substantial forward liabilities after having disposed of its fleet.

“Despite AirAsia’s request for a revision of the report, the misleading statement remains, causing damage to our reputation,” the airline said.

Under the LTIS, the accrual of any benefits to employees are “subject to the achievement of certain performance conditions” set out in AirAsia’s annual bonus scheme, prescribed by the LTIS committee, and approved by the board, the company said.

“The incentive programme is similar to many other airlines and industries [the] world over, which encourages stronger employee performance aligned to shareholders’ interests.

“Through this proposed scheme, we would be able to mitigate paying competitive cash bonuses in order to retain a strong talent pool over the next few years, and thus supporting the company’s strict cost containment measures,” he added.

Under the LTIS announced on Feb 17, AirAsia proposed to issue up to 10% of its total issued shares for eligible employees and directors.

The proposed ESOS will grant key senior and critical junior talent the option to subscribe to new AirAsia shares at an exercise price, and will be vested on a three-year cliff vesting. The proposed SGS, meanwhile, would allow AirAsia to award shares to select senior employees in lieu of cash bonus.

The LTIS is subject to shareholders’ approval in the airline’s upcoming extraordinary general meeting (EGM).

AirAsia is currently in the midst of raising RM2 billion to RM2.5 billion in order to sustain the company ahead of a recovery in the aviation sector, hit hard by border closures due to the Covid-19 outbreak.

The company has slashed its staff count by 10%, and hinted at more dismissals on a furlough basis come May, if domestic interstate travel remains banned to control the pandemic.

Shares in AirAsia had slid one sen or 0.88% to RM1.13 at the time of writing today, valuing the low-cost carrier at RM4.31 billion.

Read also:
AirAsia books wider-than-expected 4Q net loss of RM2.4b

Tan Choe Choe