Ernst & Young, the auditors of Malaysia-based LCC Air Asia, has said in a release to Bursa Malaysia that there are doubts the cash-strapped airline is still a going concern.
Trading in the shares was briefly halted after the stock exchange announcement but resumed later as the market digested E&Y unqualified audit opinion that there is material uncertainty “relating to going concern in respect of [Air Asia’s] audited financial statement for the financial year…2019”.
EY’s stock exchange note pointed to Air Asia’s RM283 million loss for the financial year ended 31 December 2019 and that its current liabilities exceeded its current assets by RM1,843 million.
“Further, in early 2020, the global economy, in particular the commercial airlines industry, faces uncertainty as a result of the unprecedented COVID-19 pandemic. The travel and border restrictions implemented by countries around the world has led to a significant fall in demand for air travel which impacted the Group’s financial performance and cash flows,” EY said in the statement.
“These events or conditions, along with other matters as set forth in Note 2.1 and Note 48 to the financial statements, indicate existence of material uncertainties that may cast significant doubt on the Group's and the Company’s ability to continue as a going concern,” the auditor added.
While over 30 governments globally have provided state aid to their airline sector Malaysia is yet to do so, while countries in South East Asia, which is the LCC’s core market have imposed some of the toughest COVID 19 travel restrictions.