Update AirAsia's shares recover slightly after Indonesia's transport ministry softens tone

by **Cals** Fri 10 Jul 2015, 00:44

Update
AirAsia's shares recover slightly after Indonesia's transport ministry softens tone

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By Samantha Ho / theedgemarkets.com | July 9, 2015 : 4:00 PM MYT

KUALA LUMPUR (July 9): Shares of AirAsia Bhd have shown a mild recovery today after Indonesia’s transport ministry appeared to soften its stance requiring the country's airlines to have positive equity or risk revocation of their operator's licences.

As at 3.28pm, AirAsia's share price was down 1.54% to RM1.28, with 54.41 million shares done. Yesterday, the stock plunged 19 sen or 12.75% to close at RM1.30.

AirAsia group chief executive officer Tan Sri Tony Fernandes said on Twitter today that he had seen a positive outcome from talks with Indonesian officials.

"Had great meetings in Indonesia at the highest levels. Very confident of a good turnaround there. We got some real jewels," he posted.

Fernandes told The Edge Financial Daily yesterday that the Indonesian authorities would review AirAsia's loss-making associate [size=14]PT Indonesia AirAsia ([You must be registered and logged in to see this image.] Financial Dashboard)’s (IAA) operating licence, adding that there was no mention of suspending its licence in the letter IAA had received from the ministry.

On Monday, Indonesian Minister of Transport Ignasius Jonan had told The Jakarta Post that 13 airlines including IAA were found to be in a state of negative equity (the value of an asset used to secure a loan is less than the outstanding balance on the loan) and given until the end of this month to improve their financial standings or risk revocation of their operator's licences.

In a separate report today, Reuters quoted Indonesia's transport ministry as saying that it would help airlines struggling to meet a deadline to improve their finances, seemingly softening its stance after concerns about the measures sent AirAsia's shares plunging to five-year lows yesterday.

A spokesman told Reuters the Indonesian ministry would "decide in the future" on that matter.

Reuters also reported Fernandes as saying to reporters in Singapore that he welcomed the latest Indonesian statement.

"There are no financial difficulties in Indonesia," he said. "We have said that it needs funding and we are going to clean it up. But you can't arrange funding in three weeks."

In a separate statement today, IAA president director Sunu Widyatomoko said suggestions that the airline's operational licence will be called into question is not accurate.

"The airline's operation remains as per normal... The level of our equity has never been an issue as the company has been fully funded through a variety of sources.

"This has never compromised our absolute commitment to the global standards of safety and best practices of our operations," he added.

Sunu said IAA will be in active discussion with Indonesia's Ministry of Transport to ensure that the ministry's regulatory directives will be met.

"Our underlying business has been robust and cash flow positive as of the first quarter of 2015. Separately, our shareholder AirAsia had previously announced plans to raise the share capital of IAA, as well as to conduct an initial public offering in an effort to further pursue our growth plans in Indonesia," he noted.

Sunu added that IAA has also been working closely with Indonesia's President Joko Widodo, the Ministry of Tourism and the Ministry of State-Owned Enterprises to actively drive tourism as one the key strategic economic pillars of the country.

"IAA employs over 2,000 Indonesian pilots, cabin crew and staff and we are proud to be a major employer in the Indonesian aviation industry," he said. Since 2004, IAA has flown over 20 million international tourists into Indonesia.

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