KUALA LUMPUR (May 2): Capital A Bhd (KL:CAPITALA) said on Friday its auditors gave an unqualified report on its 2024 accounts, but raised doubts about its ability to keep operating due to uncertainty over the sale of its stakes in AirAsia Aviation Group and AirAsia Bhd.

Auditors Ernst & Young PLT raised concerns as key steps in Capital A’s plan to sell its stakes in AirAsia Aviation Group (for RM3 billion) and AirAsia Bhd (for RM3.8 billion) to AirAsia X Bhd (KL:AAX) are still incomplete. The deals rely on approvals from government entities, financiers/lenders and third parties, while hinging on AAX securing RM1 billion through a private placement.

It said if the conditions are not met or waived on time, the sale agreements will become void. This would negatively affect the group's plan to reduce the liabilities of AirAsia Aviation Group Limited and AirAsia Bhd by the end of 2025, which could impact its financial situation. As a result, there is significant doubt about the group's ability to continue operating.

In a separate statement, Capital A sought to reassure investors that it will be able to complete its proposed regularisation and restructuring plan by June 2025.

Outlining the progress it has made towards completing the plan, it said AirAsia X’s RM1 billion private placement is nearly complete, with a sovereign wealth fund as the lead investor and confirmation from another investor, while the Securities and Exchange Commission (SEC) in Thailand is expected to give its approval by early May.

It added that approvals from most lenders' have been secured, with the remaining two expected soon.

Capital A said the aviation business sale, part of its restructuring, is nearing completion while extraordinary general meetings to approve the regularisation plan will be held on May 7, 2025.

It also said that the 2024 financial audit is complete, while it recorded a strong performance in the first quarter of 2025 due to high demand, lower fuel prices and stronger Asean currencies.

“The group remains steadfast and positive on its outlook despite the inclusion of a Material Uncertainty Related to Going Concern (MUGC) paragraph in the company’s latest audited consolidated financial statements — which the group views as a procedural outcome tied to timing, and not a reflection of deterioration in its business fundamentals,” it said in the statement.

In a separate statement, Capital A also said it is actively exploring a potential dual listing in Hong Kong as part of efforts to fund growth of its digital and aviation services businesses.

Discussions are ongoing and Capital A is close to appointing an international investment bank to advise it on the proposed listing structure and timeline, the company said. Plans to initiate the formal process are subject to internal assessments and regulatory approvals, it noted.

Capital A’s regularisation plan, submitted on Dec 23, 2024, aims to fix its financial troubles and regain investor confidence. The plan involves reducing share capital by up to RM6 billion to offset losses and reorganising its business units. Once completed, Capital A will expand beyond low-cost airline operations into a broader aviation and digital services business.

At midday break, shares of Capital A were 5.66% higher at 84 sen, valuing the group at RM3.60 billion.