Monday, August 30, 2010

Amount Owed By AirAsia Subsidiaries!

I had mentioned before the fact that AirAsia's subsidiaries owes AirAsia a lot of small change!

In the posting on 19th Aug 2010: Review Of AirAsia Earnings

  • I would like to see AirAsia collect all the money due from its associates! It's no small change.

1 June 2010: How Good Is AirAsia's Latest Earnings?

  • Look at all the amount due from 'jointly controlled entity' and amount due from associates.

    The sum owed is not small, yes?

    I cannot understand it. AirAsia itself owes it banks so much money, and here it is, allowing its associates and jointly controlled entity to owe so much money in return.

From AirAsia most recent earnings report.

As you can see these amounts are certainly no small change.

On today's Business Times...
  • AirAsia associates' debt may be turned into equity

    By Jeeva Arulamapalamb Published: 2010/08/30

    The collective debt from both Thai AirAsia and Indonesia AirAsia is about RM800 million, says Datuk Seri Dr Tony Fernandes

    Low-cost carrier AirAsia Bhd (5099) may convert debt owed by its associates into equity when they seek listing, its chief said.

    Group chief executive officer Datuk Seri Dr Tony Fernandes said that AirAsia's current shareholding of 49 per cent each in Thai AirAsia and Indonesia AirAsia would be diluted once they are listed on their respective exchanges.

    "If our shareholding is reduced to say 30 per cent with new shares issued in a listing exercise, we could opt to buy new shares to increase our shareholding," he told Business Times in a telephone interview.

    Fernandes said the collective debt from both associates was about RM800 million. This option was another consideration to an outright cash settlement from both associates.

    While both associates have turned profitable, Kenanga Research said a cash settlement from the associates was still premature to conclude.

    In the second quarter ended June 30 2010, AirAsia Thailand posted a net profit of 49 million baht (RM4.9 million), compared to a loss of 80 million baht (RM7.9 million) a year ago.

    In the same quarter, AirAsia Indonesia made a net profit of 111 billion rupiah (RM39 million), against a loss of 64 billion rupiah (RM22 million) in the previous corresponding period.

    "Based on our scenario analysis using IPO (initial public offering) and five times PE (price-to-earnings) as the assumptions coupled with RM773 million amount due from both associates, we conclude that the immediate cash settlement could be from Indonesia AirAsia with AirAsia maintaining a 49 per cent stake," Kenanga said in its report dated August 19.

    The airline's outlook for the year remains strong, driven by the year-end festivities and public holidays which generally boost air travel.

    AirAsia recorded 26 per cent growth in revenue to RM940.66 million in its second quarter.
    One of the contributors was a steep rise in ancillary income, which jumped 59 per cent to RM43 per passenger. Ancillary income growth was driven by AirAsia's baggage supersize, cargo and "hot seat" selection.

    Fernandes said the aim was to increase ancillary income to RM60 per passenger within three years.

    As for load factor, Fernandes said it would continue to climb as the airline's routes begin to mature. It was 77 per cent in the second quarter.

    "Only half of our routes are matured so there is another half that is maturing. When our routes are really matured, load factor can increase to about 85 per cent. Generally, it will take another three to four years before the other routes start maturing," he said.

Turning debt owed into equity? ( Err... why is the debt owed so much in the first place? Is it even allowed that a subsidiary 'borrow' so much money from its holding company? )



How about using the debt owed to pay off it's own debts?