Question

how can issuing more shares be a strategy of Air asia during the pandemic? explain

Answer 1

During this pandemic Airlines industry was the one which suffered the most because of the lockdown across the world in many countries and it did cause a significant amount of financial damage to the industry. For the past 6 months during the pandemic very little to no flights operation or travel has been going on from one country to another and this caused a significant amount of drain on the financial resources for the company. At this time the share prices of the company are down so the company can use the equity shares as a mode to raise capital base to recover from this pandemic. Although most companies choose to issue equity when the market is booming but here the situation is very different as most countries are struggling to contain the pandemic and issue of debt at this time might not attract large investors but issue of equity can because once the pandemic is over the airlines industry will be back to normal and operating at full capacity and given that in current market scenario the equity share price would be available at reasonable price the company can attract large number of investors, by issuing equity shares the company can raise funds and get back to operating at normal level in less time rather than waiting for government support.