This article first appeared in The Edge Malaysia Weekly on January 17, 2022 - January 23, 2022

In July last year, AirAsia Bhd announced a renounceable rights issue of 1.3 billion redeemable convertible unsecured Islamic debt securities (RCUIDS) at 75 sen each, raising RM974.51 million. To recap, the RCUIDS were issued on the basis of two RCUIDS with one warrant for every six AirAsia shares held. On Dec 31 last year, the RCUIDS and warrants started trading on Bursa Malaysia.

Two weeks after the RCUIDS and warrants started trading — on Jan 13, last Thursday — the budget airline was dealt a body blow when regulator Bursa Malaysia dismissed its appeal from being classified as a cash-strapped Practice Note 17 (PN17) company. AirAsia had initially triggered the PN17 criteria in July 2020 but was saved by a Bursa Malaysia relief measure of 18 months brought about by the Covid-19 pandemic. For the budget airline, the relief measure ended on Jan 7 this year.

Following the announcement of Bursa Malaysia’s decision last Friday, AirAsia’s stock closed at 62 sen, down 12.5 sen, clawing back from a 26.17% dip to 55 sen in early trade — its lowest since end-October 2020.

AirAsia has talked about various plans, including the listing of its digital assets, which are said to be valued at US$5.2 billion, and RM1.6 billion from the RCUIDS and the conversion of warrants (strike price of RM1 and expiring in December 2028), and other corporate exercises, which may include the sale of its maintenance, repair and overhaul operation held under Asia Digital Engineering Sdn Bhd. Then again, selling some of these assets may result in higher costs for the budget airline.

AirAsia and its CEO Tan Sri Tony Fernandes seem to be caught between a rock and a hard place, facing the uphill task of reviving the company and bringing back its lost glory.

To put things in perspective, as at end-September 2021, AirAsia had negative shareholders’ funds of RM3.15 billion and accumulated losses of RM5.76 billion. It has 12 months starting Jan 7 to come up with a restructuring exercise to regularise its financial condition. 

If the AirAsia management could turn back the clock, would it still have paid the hefty dividends it did three years ago?

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