Risk Type Climate-related Risk Description Potential Financial Impact Mitigation Strategy Transition Risks Reputation (iii) Increased stakeholder concern or negative stakeholder feedback We are taking a targeted approach to increasing our scores in the FTSE4Good and Corporate Sustainability Assessment (CSA) ratings. This will affirm our sustainability attainments and enable AirAsia’s shares to be listed in reputable sustainability indexes that make us eligible for investments by green funds. Physical Risks Acute Risk of extreme temperatures At extremely high or low temperatures, aircraft may become inoperable or rendered uncertified to operate. On extremely hot days, aircraft may not be able to take off due to reduced engine performance, resulting in delays or revenue loss from offloading pax/cargo. We may operate seasonable schedules to minimise exposure to disruptions caused by extreme high temperatures. Increases in hot days can also cause heat buckl ing on runways and taxiways and other infrastructure damage. Such damage could increase operational and repair costs for airports which would eventually be passed on to airlines and travellers. To avoid aircraft being stranded at airports experiencing extreme temperatures, we may undertake pre-emptive cancellations by expanding coverage of weather forecasting services. Risk of increasing frequency and severity of weather events Weather events such as floods and typhoons put at risk operations and infrastructure at affected airports, including three of our four major hubs. Bangkok and Jakarta are increasingly vulnerable to flood risk while Manila to typhoon disruption. Other than asset damage, these weather events can result in revenue losses and substantial costs relating to cancelled flights and airport closures. We maintain up-to-date business continuity plans for weather risk affecting all four major hubs. We are also planning a climate-related disaster scenario exercise to test and improve our disaster management and recovery processes. Chronic Risk of longerterm changes in weather patterns Rising sea levels will render some coastal airports inoperable, forcing cities to build new airports further inland. AirAsia will have to bear the cost of informing booked guests and communicating changes for future bookings. Demand may be impacted if the airport is far from the city centre. New airport construction costs may also result in higher airport taxes and other fees. We recognise that rising sea levels may be inevitable. Our Government Relations department is liaising regularly with the ministries of transport of all AOC countries to keep abreast of any plans to move major airports. Jakarta is one of the most vulnerable cities to rising sea levels. It is also documented to be sinking fast, prompting the Indonesian Government in 2019 to announce the relocation of its administrative capital to East Kalimantan. This could affect growth projections, and result in increased costs as regulatory staff will either need to relocate or travel frequently to Balikpapan for meetings with regulators. Our strategy team will incorporate the projected impact of climate change into our fleet and routes strategy. S U S T A I N A B I L I T Y S T A T E M E N T A N N U A L R E P O R T 2 0 2 1 1 3 5
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