The future of low-cost carrier Air Asia has been called into “significant doubt” by auditors Ernst & Young.
In a statement to the Kuala Lumpur stock exchange late on Tuesday, the company pointed to huge debts at the carrier.
Ernst & Young pointed out liabilities at Air Asia already exceeded assets by more than £340 million at the end of 2019.
The situation is likely to have deteriorated further as airlines around the world battle a slowdown in travel in the wake of the coronavirus pandemic.
Shares in the Malaysian-based airline fell by more than ten per cent this morning in response.
The financial performance “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,” Ernst & Young said in its unqualified audit opinion statement.
However, the gloom may be lifting as the lockdown eases.
“Nevertheless, with the recent progressive uplifting of restriction on interstate travel and domestic tourism activities within the operating countries, the group has seen positive developments on its business operations as passenger seat booking trends, flight frequencies and load factors are gradually improving to cater for the increasing demand,” the auditors added.
Founder Tony Fernandes, who also co-owns Queens Park Rangers football club in the UK, acknowledged problems, but said they would be overcome.
“This is by far the biggest challenge we have faced since we began in 2001,” Fernandes said in a statement.
“Every crisis is an obstacle to overcome, and we have restructured the group into a leaner and tighter ship.
“We are positive in the strides we have made in bringing cash expenses down by at least 50 per cent this year, and this will make us even stronger as the leading low-cost carrier in the region,” he added.
AirAsia said it was in talks over joint ventures and collaborations that may result in additional investment.
It has also applied for bank loans and is weighing proposals to raise additional capital.