Friday 29 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on June 22, 2020 - June 28, 2020

THE government has no plan to inject cash or give soft loans to any of the Malaysia-based airlines, Finance Minister Tengku Datuk Seri Zafrul Aziz says, quashing talk of a bailout.

“The airlines are free to tap on loans that are guaranteed jointly with the government, like Danajamin [Nasional Bhd]. Danajamin loans are available to all sectors. Twenty per cent of the risk is taken by the banks, and 80% of the risk is actually guaranteed by the government. So, logically, banks should take the risk [to lend] because we are taking more risk than them,” he tells The Edge in an interview.

Any help that the government provides has to go towards helping the companies, and not their shareholders, Zafrul says, stressing that the government will not stand for bailouts.

“Let’s say Company X [is in trouble], and then you buy the owners out. Now, that is what I mean by bailout because, one, it’s not fair because it is government money and, two, it’s politically suicidal,” he remarks.

Zafrul’s comments come as a growing number of countries, including Singapore, Hong Kong and Germany, are coughing up rescue packages for their flag carriers.

Earlier this month, The Edge reported that the local airlines, including AirAsia Group Bhd, were racing against time to raise funds to keep their operations going, hurt by the months of no business during the Covid-19 movement restriction period. The government, through Khazanah Nasional Bhd, owns loss-making Malaysia Airlines Bhd (MAS). The flag carrier is considered a strategic asset.

“For me, as a [part of] Khazanah’s board, we look at MAS. And MAS obviously will have their plans. But at the Ministry of Finance level, there is no intention, no plans, to give money to Khazanah to inject into MAS,” says Zafrul.

Khazanah, as the direct shareholder, will have to seek a solution for MAS on its own.

“They [Khazanah] can borrow, they can inject [cash] if they really have to — as you said, it is a strategic asset, right — or they can find a partner. We hear some airlines are talking to partners. So, they have to find a solution first. And none of them have come [to us], actually, to ask for money to buy them out. They’ve only asked for soft loans,” he reveals.

AirAsia, which has gone through a bout of job cuts, is reportedly in talks to bring in South Korea’s SK Corp as a new investor, a move that could potentially bring about a RM334 million cash injection.

What has AirAsia asked the government for?

“They’ve shared with us a lot of their concern on SOPs (standard operating procedures) to fly again, which we have addressed to make it more palatable, based on [that recommended by the] International Air Transport Association (IATA). I think we were more strict than the [rest of the] world. But that has been addressed. And then looking at all the other incentives, whether we can help them on the wage subsidy, increase the limit … these kinds of things. On the loan side, I think they are talking to the commercial banks. They have not asked [the government for loans],” says Zafrul.

He stresses that the government has not given soft loans to anyone. “You give to one, you have to give to all. We support the various sectors through the current financial infrastructure … so, the bigger companies like airlines should talk to Danajamin [for loan guarantees].”

Zafrul points out that the local airlines have always been plagued with challenges, even before the Covid-19 pandemic. “What they are facing today in Malaysia is a structural challenge, so they also have to address that themselves.”

But is the government prepared to let the airlines collapse and deal with thousands of job losses? “We will look at it when the time comes. But as of now, like I said, they have not asked for us to buy them out, nor to give them free money. Just loans — and we’ve said, in terms of loans, you can tap on the banks.”

In April, IATA had urged 18 governments in Asia-Pacific, including Malaysia, to provide support for their airlines. Conrad Clifford, regional vice-president for Asia-Pacific at IATA, says that, while the Malaysian government has announced a US$58 billion enhanced economic stimulus package, it is unclear how much of it really goes directly into supporting the airline industry.

“Action needs to be taken urgently to assist the airlines through this crisis by providing direct financial support in the form of loans, loan guarantees, corporate bonds and incentive schemes. We estimate passenger demand for Malaysia to fall 51% in 2020 compared with 2019, putting at risk some 220,000 jobs, including those that depend on the airline industry, such as travel and tourism,” Clifford later told The Edge, as reported earlier this month.

 

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