By PK Medappa
AIRASIA wishes to provide further clarification regarding its proposed share grant scheme (SGS) that – along with a proposed employee share option scheme (ESOS) – forms a long term incentive scheme (LTIS) for eligible employees of AirAsia Group Bhd and its subsidiaries.
An official announcement regarding the LTIS was made to Bursa Malaysia on Feb 17.
While both the proposed ESOS and SGS are an industry norm and similarly practised by many other airlines and businesses world over, we take cognisance of a report by UOB Kay Hian Research dated March 22 pertaining to the matter.
The report contains misleading allegations especially regarding the proposed SGS and questions the company’s corporate governance (CG). We would therefore like to provide clarification to set the record straight.
In particular, we find this part of the report misleading: “Investors buying into forward prospect but have to be mindful of forward liabilities and CG issues as well.
“We are perplexed by AirAsia’s proposal to issue new shares at no cost to key executives and question the rationale of the move at this juncture when AirAsia is 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.
Rewarding employees’ sacrifice
As a company that is always at the forefront of innovation, AirAsia has undergone a remarkable transformation throughout the pandemic from just an airline into a digital consumer and lifestyle platform and this is set to grow to form a significant half of its total business in years to come.
The company recognises the contributions made by many senior executives, managers and every Allstar (AirAsia staff/employees) towards making this a reality.
However, the situation we are currently in with prolonged effects brought about by the COVID-19 pandemic has made it rather difficult for the company to continue to remain competitive in rewarding its employees in the traditional manner with appropriate cash and bonus payments.
In fact, as part of our cost containment and cash conservation exercise, a salary sacrifice scheme ranging from 15% to 100% was put in place in March 2020, affecting the take home amounts for many Allstars.
Allstars will always come first. They have suffered financially due to the COVID-19 pandemic, and still shown loyalty towards the company. We therefore want to reward these employees in a manner that aligns the upside in shareholder value creation to wealth creation opportunities for the Allstars.
The LTIS, comprising both ESOS and SGS, is a sustainable alternative for us to reward eligible employees and directors of the company.
It is a long-term employee incentive programme that serves to reward strong employee performance, supports retention of great talent and helps us conserve cash at the same time.
The accrual of any benefits to the employees under these schemes are subject to the achievement of certain performance conditions as set out in AirAsia Group’s annual bonus scheme prescribed by the LTIS committee and approved by the board.
The incentive programme is similar to many other airlines and industries 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.
Turnaround seems promising
Many positive indicators are pointing to AirAsia making a strong comeback starting this year, based on vaccines being rolled out globally, encouraging developments in the formation of leisure travel bubbles and digital health passports, better education among the population on the importance of adhering to strict standard operating procedures (SOPs) alongside strong pent up demand for travel across the region.
The proposed LTIS is subject to the approval of the shareholders of AirAsia Group at the company’s extraordinary general meeting (EGM) to be convened.
On the corporate side, our recent private share placement exercise was very well-received and supported by many prominent institutional investors both locally and abroad, supporting our goal of raising funds of between RM2 bil-RM2.5 bil and signifying a strong vote of confidence towards our aviation turnaround strategy and digital potentials.
The company expects international flying to commence in 2H 2021 and throughout 2022 as the majority of our key international markets are in green zones and likely to reopen their borders first.
Meanwhile, our digital transformation strategy over the past year has been accelerated and continues to gain momentum to ensure strong additional non-airline revenue growth with an ecosystem of over 15 synergistic travel and lifestyle product lines all leveraging off each other.
We have reviewed every aspect of our operation to put in place the right platform for a viable and sustainable future. It is therefore crucial for the company to be able to retain its best talents in order to support future aggressive growth in both our airline and digital businesses. – March 29, 2021
PK Medappa is AirAsia Group’s head of people and culture.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.