Just days after Malaysia Airlines announced its restructuring plan the long haul low cost arm of the AirAsia Group, AirAsia X (AAX), has proposed to undertake a group-wide debt and corporate restructuring with a revised business model to survive and thrive in the long-term.
In a filing with the Malaysian bourse, the budget carrier said “a major debt restructuring and a renegotiation of its financial obligations are pre-requisites for any raising of fresh equity which will be required to restart the airline”.
The carrier has proposed that the debt of RM63.50 billion (US$15.3 billion) to unsecured creditors be reconstituted into an acknowledgement of indebtedness for a principal amount of up to RM200 million.
“Any balance in excess of the reconstituted amount and all other sums after the cut-off date as at June 30, 2020 arising from these debts (including interest, penalty interest) shall be waived,” it said in the statement.
AAX said it is facing severe liquidity constraints in meeting its immediate debt and other financial commitments, “based on its current financial position and the industry outlook”.
In a separate statement, AAX said: “Travel and border restrictions have grounded all scheduled flights and there is no imminent return to normalcy. An imminent default of contractual commitments will precipitate a potential liquidation of the airline.”
To avert liquidation and enable the airline to take to the sky again AAX rationalised its only option is to undertake a major debt restructuring and a renegotiation of its financial obligations.
To lead the ‘charge’ to ensure the airline will be able to fly again is chartered accountant and former investment banker, Datuk Lim Kian Onn, who has been appointed as deputy chairman. He has been a board member of AAX since 2012.
The restructuring will also see a revision of the group’s business plan that involves route network rationalisation, aircraft fleet right-sizing, cost base overhaul and workforce optimisation to ensure a leaner and more sustainable business.
AAX will engage with its business partners, citing their support as “key success factors” to the proposed restructuring plan. It hopes to enter into contracts and agreements that are “reflective and supportive of the airline’s revised business plan upon successful completion of the restructuring”.
Under the proposed scheme, AirAsia Unlimited Pass holders and guests with valid flight bookings will receive travel credits with extended validity for future travel or purchase of seat inventory.
AirAsia X CEO Benyamin Ismail said AAX, like other airlines worldwide, is struggling to survive amidst the pandemic.
“It has been extremely difficult for the airline during this period as we had to ground all scheduled flights, implement salary cuts and retrenchment for the first time in the company’s history as a consequence of the pandemic. Similar exercises are likely to continue during the restructuring process, but our focus is to ensure a successful restructuring to keep as many jobs as possible.
He said AAX, with its low cost base, “is in the right part of the market and many of our key markets are in green zones, which are likely to reopen first. We have a robust recovery strategy in place and, with the continued support from our stakeholders, we will overcome all challenges and come out stronger.”
Benyamin gives his assurance the airline will resume operations as soon as possible once the border restrictions are lifted.
The company’s immediate focus is to obtain all necessary approvals and execute the proposed restructuring plan over the next few months, he added.
• All images credit: AirAsia
