PETALING JAYA: Aviation specialist Roger Teoh has suggested that AirAsia issue new shares to strengthen its cash position to survive the Covid-19 pandemic.
Speaking to FMT, Teoh noted that the airline raised RM1 billion in debt financing last week but said raising its equity capital might still be necessary and could be favourable because its share price was still selling above its net tangible asset value.
“With the new equity, AirAsia can then leverage up by raising more debt to further shore up its liquidity position,” he added.
It was recently reported that AirAsia Group Bhd’s current liabilities had surged to RM8.5 billion, exceeding its current assets by RM3.6 billion.
It slipped into the red in the first quarter of the year, incurring a net loss of almost RM1 billion. Losses in the second quarter are forecast to be bigger.
Teoh said he was surprised that AirAsia’s management did not raise a significant amount of capital much sooner.
“Even several well-run airlines around the world raised a significant amount of equity capital early on in the pandemic when their share prices were still selling at favourable prices.”
He said AirAsia, in its slowness to act and in the smallness of the amount of capital it had raised, behaved like US investment bank Lehman Brothers did during the 2008 financial crisis.
“It’s CEO resisted calls to raise a significant amount of capital out of fear of shareholder dilution and the firm eventually went bankrupt.”
Teoh acknowledged that an equity raise would be negative for existing AirAsia shareholders and would be a difficult decision for the company to make, but he said it might have to be done for the long term survival of the airline.
Asked if Putrajaya should bail AirAsia out, Teoh said this could raise the issue of “moral hazard” as it could encourage future reckless behaviour in the private sector.