Report: AirAsia to get RM1b loan with 80pc government backing

By MT Webmaster On Oct 13, 2020

(MMO) – Low-cost carrier AirAsia Group has secured a RM1 billion loan that will be almost entirely guaranteed by the Finance Ministry, according to sources.

Nikkei Asia reported that the loan will come from several local banks and extended under the Danajamin Prihatin scheme.

The sources also said the government initially agreed to only half the amount before relenting to the full billion ringgit sought.

They also asserted that the Finance Ministry will guarantee 80 per cent of the loan.

“The RM1 billion is deemed very crucial for AirAsia, to be utilised for repayment of short-term loans and fund working capital,” one source close to the ministry was quoted as saying.

It further stated that the disbursement is expected next month just as AirAsia also recently announced that the carrier will embark on another round of job cuts next month, according to another source quoted in the report.

The group, controlled by Tan Sri Tony Fernandes, has already cut more than 10 per cent of its workforce and plans to downsize its fleet of aircraft to try to contain costs.

In an interview with Nikkei Asia in July, Fernandes reportedly revealed that the airline needed to raise RM2 billion in the next six months to be in a “very comfortable” position.

“At RM1 billion, we are comfortable. But if we can raise RM2 billion, we would be in a very comfortable position,” he said then.

Fernandes did not respond to queries from Nikkei Asia seeking comment.

The Danajamin Prihatin Scheme was introduced by Prime Minister Tan Sri Muhyiddin Yassin to provide financial assistance to companies affected by the coronavirus pandemic. The government guarantee is for the first five years of the financing period.

On Friday, it was also reported that more than 2,400 AirAsia employees were laid off since Malaysia’s borders were closed in March.