AirAsia Sees Robust Recovery Next Year As Cash-Strapped Airline Raises $233 Million From Rights Issue

AirAsia Group—controlled by Malaysian tycoons Tony Fernandes and Kamarudin Meranun—expects a strong rebound in air travel across Southeast Asia next year as the cash-strapped budget carrier raises 974.5 million ringgit ($233 million) from a rights issue.

Supported by Fernandes, Kamarudin and other existing shareholders, the fund-raising exercise will be completed tomorrow with the listing of seven-year Redeemable Convertible Unsecured Islamic Debt Securities (RCUIDS) and warrants, AirAsia said in a statement on Wednesday. The RCUIDs, which have a nominal value of 0.75 ringgit each comes with free detachable warrants, allocated on the basis of two RCUIDS with one warrant for every six AirAsia shares held.

“The rights issue is a key component of our overall fund-raising strategy supporting a strong rebound in air travel across Asean in 2022,” Fernandes, AirAsia Group CEO, said. “We are gradually resuming flights in all of our key markets and look forward to returning to pre-Covid levels on many of our popular routes in the new year alongside strong vaccination rates, better testing procedures and education in all of our markets.”

Together with the rights issue proceeds and the 500 million ringgit guaranteed loan from Malasyian state-owned Danajamin Nasional Bhd, AirAsia has now raised 2.5 billion ringgit in fresh capital. The funding will provide strong liquidity for the airline to ramp up operations through next year, Fernandes said.

“After the most challenging two years in commercial aviation history, the end is finally within reach,” Fernandes said. “We have survived the pandemic. We have restructured, relaunched and are now in a stronger position to recover faster.”

Airlines were among the hardest hit by the pandemic as governments around the world imposed lockdowns and restricted cross-border travel to curb the further spread of the virus in the past two years. Airlines around the world will lose about $52 billion this year after incurring about $138 billion in losses last year, according to estimates by the International Air Transport Association.

“We have used the downtime in flying to review every aspect of our airline operations with a strict focus on cost containment and implementing an optimal network and fleet strategy to put in place a solid platform to return to the skies leaner and stronger than ever in all key markets,” Fernandes said. “We have also transformed into a digital travel and lifestyle services group which isn’t solely reliant on airfares alone, providing a more robust and resilient model for the future.”

Last month, AirAsia launched a parcel delivery service to tap the e-commerce boom across Southeast Asia. The new venture complements the airline’s food delivery and ride-hailing services, which are part of initiatives to build a superapp that will compete with Southeast Asia’s tech titans such as Indonesia’s GoTo and Singapore’s Grab and Sea Group.

Fernandes and Kamarudin took over AirAsia in 2001 to build a low-cost carrier that would make air travel affordable. The partners dropped out of this year’s ranking of Malaysia’s 50 Richest people.