AirAsia Group Bhd.’s ability to remain as a going concern can be in “significant doubt” owing to the implications that the coronavirus is creating on the obligated carrier, auditor of Ernst & Young told.
On Wednesday, the airline’s existing liabilities have already moved beyond its current assets by 1.84 billion ringgit ($430 million) towards the end of 2019, a year when it published a 283 million ringgit net deficit, Ernst & Young reported in a statement to the Kuala Lumpur stock exchange. The financial performance and earnings have now been further impacted by virus-related travel limitations.
The collapse in air travel and the carrier’s financial execution “indicate the existence of material uncertainties that may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern,” Ernst & Young told in its unqualified audit opinion statement.
COVID-19 submerged the aviation sector all throughout the globe into crisis as border controls and health matters evaporated demand for air travel. On Monday, AirAsia recorded a quarterly loss of 803.8 million ringgit. It wasn’t up until late March and the end of the quarter that the reasonable airline discontinued flights.
On Monday, AirAsia’s Chief Executive Officer Tony Fernandes told in a statement: “This is by far the biggest challenge we have faced since we began in 2001,”
He informed that the carrier is in discussion for joint-ventures and alliances that may cause extra investment, and that it has even applied for bank loans and is considering proposals to bring in capital.
In the previous month, South Korean conglomerate SK Group told that they were examining a proposal to purchase a small stake in the airline. In May, AirAsia sent a memo to Malaysian banks in a pursuit to borrow 1 billion ringgit, sources acquainted with the matter told.
In an exchange filing on Wednesday, AirAsia informed that Ernst & Young’s statement and a fall in shareholder equity activated the criteria for a so-called Practice Note 17, which employs to financially disturbed enterprises. Nevertheless, the airline won’t be termed as PN17 as the Malaysian exchange discontinued the application of the status beginning from April through June in the forthcoming year as part of relief action steps in the light of the global pandemic.
AirAsia’s shares were discontinued from trading in Kuala Lumpur from Wednesday. They will restart with trading from 2:30 p.m. local time.