Put a stop to the RM300 million SDB loan to Air Asia

Kota Kinabalu, Friday, 23 October 2020

The new Sabah government must put a stop to the RM300 million loan approved by the Sabah Development Bank to Air Asia because SDB is mandated to provide development financing to projects in Sabah and not on risky ventures.

The airline industry is hardly something that SDB should be taking risks in during the coronavirus pandemic. Any banker and businessman know what crisis the airline industry facing is.

As reported, Air Asia is already being sued by Malaysia Airports for RM78.16 million.

Does the RM300 million loan by SDB to one company exceed the Single Borrower’s Limit according to banking standards?

As the new government has just taken office three weeks ago, it is safe to say that the loan was approved during the era of the last government. SDB should be made answerable for the loan approval.

According to national and international news reports, SDB has approved a RM300 million loan to Air Asia “to keep the airline afloat amid the coronavirus pandemic”. The reports stated that the RM300 million loan “would tide the airline over for two months, financing local operations.”

What will happen after the two months and the airline has not recovered? What if Air Asia ends up like Dragon Air, which is a subsidiary of the mighty Cathay Pacific, Hong Kong’s flag carrier? (Two days ago, Cathay Pacific had shut down Dragon Air).

According to the same news reports, AirAsia is reported to be raising RM2.5 billion by year-end. Two weeks ago, “its long-haul arm AirAsia X Bhd proposed a US$15.3 billion (RM63.5 billion) debt restructuring and cutting share capital to avoid liquidation.” It is alarming that the reports are already talking about “avoiding liquidation.”

What is RM300 million compared to the RM66 billion debt that Air Asia exposed to? How can RM300 million of SDB’s meagre funds help to keep Air Asia afloat? RM300 million is only 4.5% of the debt exposure of Air Asia. 

Instead, the RM300 million can do a lot to help revive the Sabah economy by lending to the housing or agricultural or construction sector in Sabah.

We wish Air Asia and Malaysia Airlines can continue to serve the nation but it is not for the Sabah government and the Sabah Development Bank to risk its very limited funds to “keep Air Asia afloat.” If any help is needed to keep both Air Asia and Malaysia Airlines afloat, then it is for the Federal government to take up the tasks.

Datuk Yong Teck Lee
SAPP President, Assemblyman (Nominated)

Related info —

  1. https://www.malaymail.com/news/malaysia/2020/10/22/mahb-files-civil-suit-against-airasia-x-for-rm78m-outstanding-aeronautical/1915380
  2. https://www.nst.com.my/business/2020/10/634319/rm300mil-loan-airasia
  3. https://www.scmp.com/news/hong-kong/transport/article/3106418/cathay-dragon-staff-bear-brunt-job-cuts-boss-says-focus
  4. https://www.aljazeera.com/economy/2020/10/21/hong-kongs-cathay-pacific-airways-slashes-jobs-kills-dragon
  5. https://www.sabahdevbank.com/
  6. https://www.reuters.com/article/airasia-group-loan-idUSL4N2HD2R6
  7. https://www.freemalaysiatoday.com/category/nation/2020/10/22/airasia-secures-loan-capital-raising-progressing-says-ceo/

Author: Johnny Chin