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AirAsia to slash workforce by 30%, considers 10% stake sale

South Korea's SK Corp among a trio of multinationals expressing interest

AirAsia -- founded by Malaysian tycoon Tony Fernandes -- has received interest from South Korea’s SK Corp to acquire around 10% of the company’s total paid-up capital. (Source photos by Tsuyoshi Tamehiro and Shinya Sawai)

KUALA LUMPUR -- Southeast Asia's biggest low-cost carrier AirAsia Group is set to reduce its workforce by up to 30% as founder Tony Fernandes considers selling a 10% stake in the airline to raise cash.

Desperately trying to stave off a cash flow crisis triggered by the coronavirus pandemic which has decimated the region's travel and tourism industry, AirAsia will also slash remaining staff salaries by up to 75% in an attempt the save the airline, the Nikkei Asian Review has learned.

The retrenchment will include cutting 60% of AirAsia's cabin crew and pilots for both AirAsia and its medium-haul affiliate AirAsia X. AirAsia Group operates through Malaysia, Thailand, Indonesia, Japan, India and the Philippines.

Almost all of the company's 20,000 employees have been individually re-evaluated since January based on salary scale and performance, with the lay-off expected to continue through to the end of July.

Multiple sources have told Nikkei that the airline -- in which Fernandes continues to hold a majority stake -- may also sell 10% of the company's paid-up shares to raise cash, with South Korea's SK Corp reportedly leading a trio of multinationals expressing interest.

The share sale would not require shareholder approval as management has already been mandated to increase the number of new shares by up to 10% at a shareholders meeting last June.

Malaysia's Star newspaper reported that Korea's third-largest conglomerate SK Corp could subscribe to new AirAsia shares of 1 Ringgit each, raising approximately $78.4 million for the airline.

SK Corp, which has a major presence in the energy and telecommunications industries via its 95 subsidiaries, registered revenue of $213.6 billion last year and is backed by to $257.9 billion worth of assets.

"All the proposals are being deliberated by the Board of Directors, with a decision can be expected as soon as next week," a source told Nikkei.

While remaining employees are asked to take pay cuts ranging between 15%-75%, Fernandes has also slashed AirAsia's capital expenditure, and the working capital of all the group's operating airlines.

Fernandes and the airline's co-founder Kamarudin Meranun have also agreed to draw no salary for the medium term.

"Budgets for departments has been slashed while the salary cuts are expected to last until the end of next year," the source said. "AirAsia only expects the situation to improve in 2022."

Employee benefits, which includes free and discounted flights and complimentary meal coupons, have been curtailed significantly.

"Bonuses, salary increments and incentives have been put on hold while only travel allowance and basic salary paid," the source said.

Another source close to Fernandes told Nikkei that Fernandes was also exploring the sale of unprofitable airline ventures in Japan and India.

"He (Fernandes) is open to reduce stakes or even exit Japan and India, due to the complexity of the domestic industry and escalating costs if compared to sales," the source, who declined to be named.

Fernandes did not respond to direct inquiries from Nikkei.

The Bangkok Post reported in May that Thai AirAsia was exploring a merger with several domestic budget carriers in an attempt to survive the pandemic.

Malaysia's government is also looking at channelling over $350 million to the country's three main cash-strapped carries AirAsia, Malaysia Airlines and Malindo Airways as part of a broader economic rescue package.

The government hopes the funds will help the airlines survive the pandemic crisis and new operating procedures which may include social distancing onboard and contactless check-in.

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