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AirAsia X working to ensure post-COVID-19 survival
October 9th 2020
AirAsia X (AAX) said this week it was working to restructure its debt and undertake a share consolidation as part of efforts to ensure its survival, access fresh capital and avoid liquidation. Read More »
The low-cost carrier (LCC), which has been grounded due to the coronavirus pandemic, was also revising its business plan to return to flying as a smaller airline with a lower cost base.
"The group is facing severe liquidity constraints in meeting its debt and other financial commitments," AirAsia X said in a regulatory filing with the Bursa Malaysia.
"To avoid a liquidation and to allow the airline to fly again, the only option is for AAX to undertake a group-wide debt and corporate restructuring and update its business model to survive and thrive in the long term."
AirAsia X said unaudited current liabilities of $3.38 billion ringgit (US$815 million) exceeded unaudited current assets of $1.39 billion ringgit at June 30, 2020, while it had an unaudited deficit in shareholders’ equity of $960 million ringgit.
"Based on its current financial position and the industry outlook, the group will not be able to meet its immediate debt and other financial commitments," AirAsia X's regulatory filing said.
"An imminent default of such commitments will result in early termination of arrangements with suppliers, creditors and financiers that will precipitate a potential liquidation of the airline."
AirAsia X said the proposed debt restructuring with unsecured creditors included about $63.50 billion ringgit of debt being "reconstituted into an acknowledgement of indebtedness by AAX" for a principal amount of up to $200 million ringgit.
Any balance in excess of the $200 million ringgit would be waived, while all contracts and agreements previously entered into would be deemed terminated.
Airline customers and travel agents who bought or made advance payments for flights, as well as travel agents with deposits for the purchase of seat inventory would receive travel credits with extended validity for future travel or purchase of seat inventory.
AirAsia X, which was founded in 2007, has operating bases in Indonesia, Malaysia and Thailand, also proposed reducing the number of shares it had on issue by 90%, with 10 existing ordinary shares consolidated into one share.
The third plank of the LCC's recovery effort involved a revised business plan focused on growing yield and profitability instead of market share and having a leaner and more sustainable cost base.
This would involve shrinking its network to a core base of routes within a five-to-six-hour range and deferring investment in new or immature routes. The airline said it would operate a fleet of up to 25 Airbus A330 aircraft, suggesting orders for A350-900 and A321XLR may be up for renegotiation.
"By overhauling the cost base, the group seeks to achieve a revised cost structure that matches the revenue generation trajectory and business recovery during/post COVID-19," AirAsia X said.
AirAsia X said the debt restructuring, share consolidation and new business plan were pre-requisites for raising funds either through equity or debt.
"For the group’s survival, fresh capital from existing and new investors and/or financiers is required and any injection of such capital will first require the group to undertake a right-sizing of its financial obligations," the company said.
"AAX seeks the understanding and continued support from all its stakeholders for the group to weather the challenges arising from the current crisis and enable the group to continue its relationship with stakeholders in the aviation industry albeit at a revised scale but one that is sustainable.”
AirAsia X said it had appointed Mercury Securities Sdn Bhd as its principal adviser for the proposed corporate restructuring, while Foong & Partners were appointed as legal adviser.
