SUSTAINABILITY - AirAsia

1 SUSTAINABILITYS ustainability Statement ..156 Materiality Analysis ..158 Safety & Health ..160 Stakeholder Engagement ..163 Talent Attraction & Retention ..170 Operational Efficiency ..173 Service Efficiency ..174 Energy Consumption & Fuel Management ..175 Risk & Crisis Management ..179 SUSTAINABILITYSUSTAINABILIT YS TAT EMEN TIN MALAYSIA, WE ARE THE LEADING AIRLINE, DOMINATING ALMOST HALF THE DOMESTIC AND INTERNATIONAL MARKETS. AND WE ARE STILL GROWING. [ ] AirAsia Group BerhadSUSTAINABILITY156[ ] AirAsia Group BerhadSUSTAINABILITY157 SUS TA IN A BIL I T Y S TAT EMEN TFollowing the completion of the internal reorganisation of AirAsia Berhad (AAB) and the transfer of its listing status to AirAsia Group Berhad (AAGB) on 16 April 2018, AAB is now a wholly-owned subsidiary of AAGB. This SUSTAINABILITY Statement represents AAB s initiatives and materiality matrix for the financial year ended 31 December 2017 (the Financial Year), which will be adopted by AAGB in the next financial year.

2 As part of the One AirAsia initiative, we are committed to reducing costs further, while improving efficiencies across the board. Apart from the impact on costs and greater revenue generation, this initiative also puts in place the long-term SUSTAINABILITY of the business as well as ensures an effective succession planning in the long was founded to enable everyone to fly. In the 16 years that we have been building skybridges across Asia, we have carried more than million guests across the Group1. In Malaysia, we are the leading airline, dominating almost half the domestic and international markets. And we are still growing. While other airlines in the region were reducing capacity in 2017, we saw the delivery of seven aircraft as we expanded our route network. Our ongoing success hinges on two key factors: staying true to our low-cost business model; and truly valuing people. The former has provided us the financial strength to grow even in less than optimum economic conditions, while the latter underlines our commitment to operating safely, responsibly and with integrity, and has gained us the trust of our stakeholders.

3 Our One AirAsia drive is adding to our efforts, providing greater career opportunities to our own people, ie our keeping our costs low and strengthening our relationships are equally important to our SUSTAINABILITY , and will continue to underpin all our actions and decisions. While we disclose our financial performance in the rest of this annual report, we describe our actions to create stakeholder value in the following pages of this SUSTAINABILITY Statement. By creating stakeholder value, we mean investing into areas that are important to our guests, our Allstars, our investors, business partners, the government and the have always had a good idea as to what is important to our guests from feedback obtained through various communication channels, as well as from face-to-face interactions. In 2016, we obtained similar insight for other stakeholders by conducting our first materiality assessment. Through a structured process of workshops, surveys and interviews, we were able to determine those issues that are important both to AAB as well as to all our stakeholders, and to prioritise these according to their impact.

4 AirAsia S MATERIALITY MATRIXM ateriality refers to issues that reflect an organisations most significant economic, environmental and social impacts (X-axis), and the concern of stakehoolders (Y-axis). Quadrants 1, 2 and 3 are prioritised issues, which we report : Priority issues Economic Environmental SocialConcern to StakeholdersImpact on the CompanyResponsible Marketingand CommunicationEffluents and WasteService EfficiencyCompetitive BehaviourFleet ManagementTransparencyHuman Rights134257689 Health & SafetyStakeholder EngagementTraining and EducationLabour Practice/Management RelationsEnvironmental ManagementGHG EmissionsTalent Attraction& RetentionEnergy Consumption & Fuel ManagementRisk & Crisis ManagementOperational Efficiency1 By the Group we refer to AirAsia Malaysia, AirAsia Indonesia, AirAsia Philippines, AirAsia Thailand, AirAsia India, AirAsia Japan, AirAsia X Malaysia, AirAsia X Thailand and AirAsia X Indonesia. Although the Group s total fleet size stood at 205, this included three aircraft on lease to third parties, six that were grounded for redeployment to other affiliates in 1Q18 and eight operated by AirAsia X Indonesia.

5 [ ] AirAsia Group BerhadSUSTAINABILITY158 Seven issues were highlighted through this materiality assessment, namely: Safety & Health Stakeholder Engagement Talent Attraction & Retention Operational Efficiency Service Efficiency Energy Consumption & Fuel Management Risk & Crisis Management We focused on these seven material matters in our SUSTAINABILITY Statement in 2016, and are reporting on them again in this report, highlighting progress made in each area. In certain material matters, such as carbon emissions, we have improved our data collection and have been able to increase the scope of our reporting. Two other key developments in our SUSTAINABILITY practice have been the establishment of a dedicated team to manage issues related to the environment, and formalisation of a SUSTAINABILITY governance structure. The head of the newly-established Green & Environmental Affairs Department will also oversee our corporate SUSTAINABILITY , and will be part of a newly set up SUSTAINABILITY Working Committee for the AirAsia of DirectorsSustainability Working CommitteeAuditCommitteeNomination and Remuneration Committee Committee Chair*Executive DirectorGROUP HEAD,CUSTOMER HAPPINESSGROUP HEAD,PEOPLE & CULTUREGROUP HEAD,GLOBAL AFFAIRS & DEVELOPMENTGROUP HEAD,COMMUNICATIONSCHIEF OPERATING OFFICERSUB-COMMITTEE 1 ENVIRONMENTAL COMMITTEESUB-COMMITTEE 2 CORSIA COMMITTEEOTHER SUPPORTINGFUNCTIONS:Risk ManagementInvestor RelationsCommercialBrandingSafety ReviewBoard* The position of the Committee Chair will always be held by an Executive Director of AirAsia Berhad[ ] AirAsia Group BerhadSUSTAINABILITY159considerable resources to keep enhancing our safety frameworks, recognising that maintaining the highest standards of safety is necessarily an ongoing mission.

6 We take a vigilant, proactive and systematic approach to protect the Group against a range of risks and strive for continuous improvement in our safety practices and Management System (SMS)Safety at AirAsia Malaysia is reinforced by a robust Safety Management System (SMS) which ensures systematic hazard and risk management in line with the requirements of the International Civil Aviation Organization (ICAO) and the Civil Aviation Authority of Malaysia (CAAM). The SMS consists of four pillars: Safety Policy and Objectives, Safety Risk Management (SRM), Safety Assurance (SA) and Safety by the SMS, we promote a safety culture within the organisation with The SUSTAINABILITY Committee, chaired by Tan Sri (Dr) Tony Fernandes, will report twice a year to the Board, while a Working Committee comprising Group Heads of Departments will ensure all our material areas are taken into consideration in our business plans and strategies. Through this governance structure, SUSTAINABILITY will be integrated more formally into our operations and risk assessment processes.

7 Clear key performance indicators (KPIs), targets and goals will be set in 2018, and reported in the of StatementThis SUSTAINABILITY Statement covers the SUSTAINABILITY initiatives of AirAsia Malaysia for the financial year 2017. The AirAsia Group is based in Malaysia, and AirAsia Malaysia remains the biggest revenue contributor. We have put in place the relevant mechanisms to collect data in Malaysia and are in the process of standardising the data collection in our other country operations. Once the relevant measurement and reporting structures are in place in our other associates, we will start reporting on their SUSTAINABILITY performance currently base our statement on the Global Reporting Index (GRI)-G4 guidelines, and are pleased to see that a number of our initiatives contribute to global SUSTAINABILITY concerns, such as those outlined by the United Nations Sustainable Development Goals (SDGs). As our initiatives mature, we hope to be able to map our performance against the SDGs that are relevant to our actions and & HEALTHThe safety of people who fly with us and work with us is something we will not compromise on.

8 It is given top priority at AirAsia Malaysia, and we invest clear lines of individual and collective responsibility and accountability. Continuous training is provided to ensure all Allstars understand our safety processes and are able to carry out their functions safely. To reinforce our commitment to maintaining the highest levels of safety, we encourage constant conversations on safety behaviours. Our objective is for every individual in AirAsia Malaysia to contribute to the safety of every aspect of our operations, on ground and in the level engagement with internal safety champions was significantly enhanced during the year with an improved reporting system that promotes vigilance among Allstars. These reports are discussed at safety meetings, which are held regularly and where proactive, innovative resolutions are TA IN A BIL I T Y S TAT EMEN T[ ] AirAsia Group BerhadSUSTAINABILITY160We are committed to developing, implementing, maintaining and constantly improving our strategies and processes to achieve the highest level of safety performance and meet national and international standards , while delivering on our customer promise for affordable, reliable and convenient flight services.

9 All Allstars are accountable for the delivery of our safety performance, starting with the Chief Executive commitment is to:SAFETY POLICY STATEMENT reporting system, unless such disclosure indicates an illegal act or deliberate disregard of regulations and procedures. Comply with and, wherever possible, exceed legislative and regulatory requirements and standards . Ensure that sufficient skilled and trained Allstars are available to implement our safety strategies and processes. Ensure all Allstars are provided with adequate aviation safety information and training hence are competent in safety matters and are allocated only tasks commensurate with their skills. Establish and measure our performance against realistic safety performance indicators and targets. Continually improve our safety performance through management processes that ensure relevant safety action is taken and is effective. Ensure externally supplied systems and services to support our operations are delivered, meeting our safety performance ASMATC hief Executive OfficerAirAsia Malaysia Support the management of safety through the provision of appropriate resources resulting in an organisational culture that fosters safe practices , encourages effective safety reporting and communication and actively manages safety with the same attention to results as the attention to the results of the other management systems of the organisation.

10 Enforce the management of safety as a primary responsibility of all managers and Allstars. Clearly define for Allstars, managers and employees alike their accountabilities and responsibilities for the delivery of the organisation s safety performance and the performance of our Safety Management System. Establish and operate hazard identification and risk management processes, including a hazard reporting system, in order to eliminate or mitigate the safety risks or the consequences of hazards resulting from our operations to a point which is as low as reasonably practicable. Ensure that no action will be taken against any employee who discloses a safety concern through the hazard Safety TrainingIdentified operational personnel, supervisors, managers, senior managers and accountable managers are required to undergo appropriate safety training. The objective is to ensure all relevant Allstars are competent to perform their SMS duties. SMS training is part of the induction programme for new Allstars, while recurrent training is conducted every two years.