Annual Report 2020

COST & CASH FLOW MANAGEMENT From the time it became evident that Covid-19 was going to have a deep impact on airlines globally, we embarked on strict cost-cutting strategies and tight cash flow management across the Group. We negotiated, and were granted payment deferrals from various suppliers and lenders. We also restructured a major portion of our fuel hedges with supportive counterparties. Maintenance costs were reduced substantially via asset optimisation, and the use of newer aircraft that are further away from major checks. Through headcount rationalisation, salary cuts and natural attrition, we saw our staff costs decrease by 38%. We also managed to lower our user charge expenses from savings in ground handling as a result of the implementation of new innovations including contactless procedures. Other operational expense reductions were achieved from cuts in marketing spend, renegotiation of ICT costs and the deferment of all non-essential expenditures. As a result of our concerted efforts, we managed to bring down the Group’s fixed costs by 52%, surpassing our target of 50%. We expect to derive even greater savings in the immediate future as we drive further efficiencies in headcount, fuel, maintenance and user charges via digital improvement initiatives. Exceptional times unfortunately also necessitate some exceptionally tough decisions. For AirAsia, it meant having to close down AirAsia Japan as well as greatly reduce our equity in AirAsia India which, now, is no longer an associate airline. While motivated primarily by financial reasons, these decisions also support a key strategic decision to focus our efforts and resources on Asean, our home ground where we have enjoyed the strongest growth and where our brand continues to garner the most loyal support. In addition, we seek to raise between RM2.0 billion and RM2.5 billion via a combination of debt and equity funding to ensure sufficient liquidity for the Group. Towards this end, we are pleased to share that two banks have committed to provide funding for AirAsia under the Malaysian Government’s Danajamin PRIHATIN Guarantee Scheme, and we are continuing with efforts to secure additional commitments from other banks. We have also explored opportunities in the international market; and in the first quarter of 2021, successfully completed two tranches of a private placement exercise through which we raised a total of RM336 million. Both tranches make up 470.21 million shares, representing 14.07% of our total issued shares. Key investors include Hong-Kong based Dr Stanley Choi; several partners including David Bonderman at US-based global investment firm TPG, investing in their personal capacity; as well as Aimia Inc. This exercise is meaningful as it indicates a high level of investor confidence in our prospects with our digital transformation coupled with air travel revival in the near future. ADVANCING OUR DIGITAL BUSINESSES As mentioned above, one of the most exciting developments within airasia digital was the launch of the airasia super app in October 2020. The app is the current iteration of the airasia.com platform that has been used since day 1 for guests to book their flights with us. Today, we are thrilled to offer more than 15 different types of products and services, with a single sign-on and the ability to earn and burn loyalty points, all within one platform. Among the super app’s hero product is the Unlimited Flight Pass, launched in June 2020 offering unlimited domestic travel in our four 65 ANNUAL REPORT 2020