Report: AirAsia will secure RM1b loan with 80% government backing | Malaysia

KUALA LUMPUR, October 13 – Low-cost airline AirAsia Group has secured a RM1 billion loan that will be almost entirely guaranteed by the Ministry of Finance, according to sources.

Nikkei Asia informed that the loan will come from several local banks and will be extended under the Danajamin Prihatin scheme.

The sources also said that the government initially agreed to just half the amount before giving up the 1 billion ringgit sought.

They also affirmed that the Ministry of Finance will guarantee 80 percent of the loan.

“The RM 1 billion is considered very crucial for AirAsia, to be used to pay off short-term loans and finance working capital,” said a source close to the ministry.

In addition, he claimed that the disbursement is expected next month, just as AirAsia also recently announced that the airline will embark on another round of job cuts next month, according to another source cited in the report.

The group, controlled by Tan Sri Tony Fernandes, has already cut more than 10 percent of its workforce and plans to reduce its fleet of planes to try to contain costs.

In an interview with Nikkei Asia In July, Fernandes reportedly revealed that the airline needed to raise RM2 billion in the next six months to be in a “very comfortable” position.

“At RM1 billion, we are comfortable. But if we can raise RM2 billion, we would be in a very comfortable position, ”he said then.

Fernandes did not respond to inquiries from Nikkei Asia looking for feedback.

Prime Minister Tan Sri Muhyiddin Yassin presented the Danajamin Prihatin plan to provide financial assistance to businesses affected by the coronavirus pandemic. The government guarantee is for the first five years of the funding period.

On Friday, it was also reported that more than 2,400 AirAsia employees have been laid off since Malaysia’s borders were closed in March.