AIRASIA-STOCKS/FERNANDES AirAsia's Fernandes says there are "no financial difficulties"

Record ID: 147917

  • Title: AIRASIA-STOCKS/FERNANDES AirAsia's Fernandes says there are "no financial difficulties"
  • Date: 9th July 2015
  • Summary: SINGAPORE (JULY 9, 2015) (REUTERS) ***WARNING CONTAINS FLASH PHOTOGRAPHY*** NEWS CONFERENCE ON CHANGI AIRPORT TERMINAL 4 IN PROGRESS AIRASIA CEO TONY FERNANDES (RIGHT) SPEAKING FERNANDES SPEAKING TO REPORTERS WHITE FLASH (SOUNDBITE) (English) AIRASIA GROUP CEO TONY FERNANDES SAYING: "There's no financial difficulties in the airline, it was well-funded, it was well-run, but
  • Embargoed: 24th July 2015 13:00
  • Keywords:
  • Location: Singapore
  • Country: Singapore
  • Topics: General
  • Reuters ID: LVA7KZ8R8KJTSU0X2Z3MBTEP7KN7
  • Aspect Ratio: 16:9
  • Story Text: EDITORS PLEASE NOTE: EDIT CONTAINS WHITE FLASHES IN LIEU OF CUTAWAYS
    AirAsia Group CEO Tony Fernandes on Thursday (July 9) brushed off worries of financial problems at its Indonesian affiliate.
    Indonesia's transport ministry said on Wednesday (July 8) PT Indonesia AirAsia was one of 13 carriers that must repair stretched balance sheets by July 31 or risk being shutdown.
    Already hit in recent weeks by questions over accounting that the airline rejected, AirAsia shares fell more than 15 percent to five-year-lows, as investors feared its Jakarta-based affiliate could be grounded for a lack of funds.
    The Indonesian ministry then issued a statement on Thursday saying it would "help and support" these airlines to improve their finances, but did not mention anything about shutting them down.
    A spokesman told Reuters the ministry would "decide in the future" on that matter.
    Fernandes, speaking to reporters in Singapore, welcomed the latest Indonesian statement.
    "There's no financial difficulties in the airline, it was well-funded, it was well-run, but, I mean, we're going to clean it up, we already announced that we want to re-capitalise the company, but you can't re-capitalise a company in three weeks," he said.
    The ministry's directive means Indonesia AirAsia, 49 percent-owned by Asia's biggest low-cost carrier, has just over three weeks to raise at least $230 million to reverse its shareholder funds deficit, analysts said.
    The tighter scrutiny on finance is part of a concerted drive by Indonesia, a loss-making but key market for AirAsia, to bolster its aviation safety credentials. Last week's crash of a military transport plane, killing more than 140 people, followed last December's crash of an Indonesia AirAsia jet with the loss of all 162 people on board.
    The focus on the Indonesia affiliate comes at an awkward moment for Fernandes, one of Asia's best-known chief executives.
    While its operational performance has improved since stiff competition squeezed it into a loss at the end of last year, investors' nerves are still jangled by a June 10 report by Hong Kong-based GMT Research that said AirAsia uses transactions with loss-making associate carriers to boost its earnings. Shares have fallen by more than a third since then.
    Fernandes was asked what he thought of the company's recent troubles.
    "This has been a very good lesson for me. I thought I went through everything, but this is something new where in the space of a month, the value of your company can halve, when actually oil has halved, and everything that was to be declared was declared, but it shows you that this is probably the problems of a free market. But you live in a free market, I subscribe to a free market, and that's the way it is," he said.
    On Wednesday, AirAsia's long-haul arm, AirAsia X Bhd said it had filed an official complaint with the country's Securities Commission against GMT Research over its "untrue, misleading and inaccurate" report. AirAsia X said the GMT Research report said profits were shifted between the two carriers by way of transfer pricing of service fees and costs charged by AirAsia.
    He said the company's current difficulties have only made him more determined.
    "I'm so damn determined now to shut some people up. I'm best when my back's against the wall, and I'm selling off all my other businesses, this is pride for me, and you know, I'm back in business, so to speak," Fernandes said.
    According to a person familiar with AirAsia's strategy, speaking on condition of anonymity, AirAsia has known "for a while" that there is a need for its Indonesia affiliate to raise funds. He said the company has been exploring options including a stock market listing for the affiliate, tapping the debt market or getting existing investors to inject more cash.
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