Airasia Approves IAA Subscription For US$227,065

KUALA LUMPUR, Dec 16 (Bernama) -- Airasia Bhd has approved the subscription of up to 3.04 billion rupiah (US$227,065) nominal value of perpetual capital securities to be issued by its 49 per cent associate, PT Indonesia AirAsia (IAA), at 100 per cent of its nominal value. On Sept 29, 2015, the company subscribed to 2.06 billion rupiah nominal value, being 49 per cent of the perpetual capital securities issued by IAA, to comply with the directive received from the Directorate-General of Civil Aviation (DGCA) of the Republic of Indonesia. "The subscription is to enable IAA attain positive equity position as directed by the DGCA in compliance with the directive. "Failure to address the capital shortfall carries the risk that the Minister of Transportation of the Republic of Indonesia would deny IAA's requests for new route approvals or even impose a suspension of operations," the low-cost airline said in a filing to Bursa Malaysia (Malaysia's Stock Exchange). It said Indonesia was a crucial market for AirAsia and that the International Air Transport Association had forecast that Indonesia was expected to be the sixth largest market for air travel by 2034 with 270 million passengers. The risk of suspension of IAA would not only affect the AirAsia brand but also affect the network and future growth of AirAsia Group, it added. The filing also said the subscription would help reduce IAA's gearing without any need for AirAsia to inject further funding or capital as it entailed a conversion of the amount owed to the company into the equity of IAA. PT Indonesia AirAsia recorded an operating profit of 229.3 billion rupiah in the third quarter of 2016 compared with an operating loss of 59.5 billion rupiah recorded in the same period a year ago. "IAA is expected to turn in a strong performance for the remaining months of 2016, buoyed by high load factor and average fare as it is continuing to observe strong demand across most sectors due to the year-end holidays and festivities. "This is coupled with a favorable fuel price environment," it said. At 4.40 pm, AirAsia's share price was four sen lower at RM2.49 with 11.67 million units transacted. -- BERNAMA