SEPANG, Malaysia, 8 October 2020 AirAsia announced this week a restructuring plan that will inject fresh equity to allow the airline to resume operations.
AirAsia X also appointed Dato’ Lim Kian Onn as the deputy chairman to lead the airline’s restructuring. A chartered accountant and investment banker, her has served as a board member of the airline since 2012.
AirAsia X is facing severe liquidity constraints due to travel and border restrictions that grounded all scheduled flights. The airline said there was no evidence of an imminent return to normalcy. It warned that an imminent default of contractual commitments would precipitate a potential liquidation of the airline.
Its media statement read: “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.”
For 13 years AirAsia X had delivered medium-haul low-cost flying, to destinations across Asia and created jobs for the airline, related travel and tourism industries as well as contributing to Malaysia’s GDP growth.
The Board and management have assessed various options and proposed a restructuring plan which if approved, would secure the airline’s continued ability to fly again. It outlined the core elements of the plan.
Debt restructuring scheme
A proposed debt settlement and waiver of debts involving unsecured creditors would enable the group to address debt obligations in an orderly manner and to arrive at a debt structure that is sustainable from future operating cash flows.
Revision of the group’s business plan
A route network rationalisation, aircraft fleet right-sizing, cost base overhaul and workforce optimisation would ensure a more sustainable business in the future.
Engagement with business partners
Key success factors in the restructuring plan include the support from business partners to continue the long-term relationship pre- and post-restructuring. AirAsia X continues to engage all key business partners and hopes to enter into contracts, agreements and/or arrangements that are reflective and supportive of the airline’s revised business plan upon successful completion of the restructuring which is critical to the future viability of the business;
Airline customers and travel agents
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.
The proposed restructuring plan and establishment of new contracts, agreements are based on terms to be agreed upon and are sustainable. The aim is to right-size the group’s operations and financial obligations, which is crucial to its continued existence in the aviation landscape.
During the last two months, the company has had extensive discussions with all major creditors. While there are varying degrees of support for the restructuring scheme, all of them have expressed strong support for a continuation of the airline business.
AirAsia X CEO Benyamin Ismail said, “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.”
Benyamin Ismail added: “In order to safeguard Malaysia’s vested interest through the aviation industry, regional air connectivity is essential for trade, businesses and economic growth, especially to our core markets of China, Japan, Korea and Australia where we have established a strong foothold.
“The closure of these markets can impact the stimulus spending, GDP contribution and employment within the supply chain of the aviation industry. As other airlines struggle in the current market condition, AirAsia X strives to emerge stronger once the market recovers. Our immediate focus is to obtain all necessary approvals and execute the proposed restructuring plan over the next few months.”