Capital A, AirAsia shares plunge on government contingency plan report

KUALA LUMPUR - Capital A Bhd and AirAsia Group Bhd witnessed major share price declines on Thursday after news surfaced of the government's potential contingency plans for AirAsia's domestic operations. Capital A shares dropped 14.55% to 23.5 sen, while AirAsia shares fell 17.19% to 53 sen. Both stocks were among the most actively traded on Bursa Malaysia.

Capital A holds a 19.5% stake in AirAsia Group, making it the company's largest shareholder. AirAsia's market capitalization stands at RM1.73 billion, while Capital A's is RM1.03 billion. Reports from Reuters on September 16 indicated that the government had reached out to Malaysia Airlines and Batik Air to explore if they could absorb AirAsia's domestic market share.

These discussions are part of scenario planning as authorities monitor AirAsia's financial health. While Malaysia Airlines and Batik Air have shown interest in expanding organically to take over AirAsia's routes and passengers, they would only consider a large-scale takeover if they could also assume its aircraft leases. The Finance Ministry recently appointed Alton Aviation Consultancy to assess AirAsia's funding requirements, as the government explores various options to support the airline.

AirAsia is currently seeking up to US$1 billion in international debt markets and RM700 million in local credit facilities, primarily for debt restructuring and balance sheet consolidation.