By Emmanuel Samarathisa
INDUSTRY observers have panned the idea of listed airlines group AirAsia Group Bhd (AAB) and its long-haul sister AirAsia X Bhd (AAX) following the footsteps of Singapore Airlines (SIA) to raise funds via a massive rights issue.
The Singaporean flag-carrier on April 14 received in-principle approval from the Singapore Exchange (SGX) to raise S$8.8 bil through S$5.3 bil in new equity and S$3.5 bil through 10-year mandatory convertible bonds, in light of the Covid-19 crisis which has crippled the global aviation industry.
But such a proposal may not be that straightforward here, Mohshin Aziz, a former aviation analyst, told FocusM.
“Normally, when you want to do a rights issue here, it’s a very long process,” he said, adding that it would take roughly between four and six months for the entire exercise to be voted on and completed.
“And four months is considered super fast. This means no hiccups throughout the entire process, from drafting to vetting by Bursa Malaysia and the Securities Commission to voting,” Mohshin said.
The SIA fundraiser was unique as Singaporean state investment vehicle Temasek Holdings Private Limited is the controlling shareholder, he added.
“So, not many airlines can replicate what SIA has done because their shareholder is basically the government and everyone knows the government is supportive of SIA. Also, Singapore is a small yet efficient country and in Singapore, there are no other airlines but SIA and Jetstar which is Australian owned. And Jetstar is a very small company with only six aircraft. But here you have a national asset and Singapore will definitely ensure SIA survives,” Mohshin said.
Kenanga Investors Bhd CEO Ismitz Matthew De Alwis noted that for the rights issue to work, both AirAsias would need to have “strong credit metrics” like SIA.
“The other three carriers that I can think of aside from SIA that meet these criteria are the Chinese carriers Air China Limited, China Southern Airlines and China Eastern Airlines.” And, for AAB and AAX, they had been hovering close to their 10-year low, added De Alwis.
AAB and AAX’s 10-year low as of April 16 stood at 50 sen and four sen respectively. The two counters stood at 72 sen and 6.5 sen at the midday break.
Mohsin said if both AAB and AAX needed to raise funds quickly, they could resort to either an emergency loan or convert debt to equity, which may not require shareholders’ approval.
On April 2, AAB founder Tan Sri Tony Fernandes told Bloomberg TV he was in talks with the government for a loan. He defended the move as not a request for a “bailout” but a “loan” as the group would run out of cash soon. — April 16, 2020
