UPDATED: AirAsia X sued by lessor BOC Aviation

Future looks dark for long-haul, low-cost carrier

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Use this one(Updates with details from Reuters interview by Tony Fernandes)

AirAsia X disclosed in a statement to Malaysian stock regulators on 4 September that it and its affiliate, AAX Leasing Two, have been sued in a London court by Singapore-based, Hong Kong-listed lessor BOC Aviation for almost US$23 million related to missed payments on four aircraft leased to the airline by BOC Aviation. AirAsia X said in the filing that its board is “reviewing” the lawsuit. BOC Aviation originally leased four Airbus A330-300s in 2014 to AirAsia X. The lease was revised in 2018.

AirAsia X, like airlines around the world, has been severely hurt by the COVID-19 pandemic that has virtually shut down international aviation. The company and its affiliate airlines have all seen flights cancelled and planes put in storage as governments around the world maintain hurdles like border quarantines. The company’s head, Tony Fernandes, has been pushing AirAsia to diversify into other areas like music and restaurants and is using the data it gains on its passengers to market those businesses.

Fernandes told Reuters in an interview on 7 September that the company is looking to raise as much as US$602 million by the end of the year and it is also reviewing its business in Japan. Fernandes said the fundraising would include money from bank loans and investors  including private equity players, strategic partners and conglomerates, both local and foreign. Fernandes said the group intends to consolidate and strengthen its ASEAN foothold “and if that means one day exiting India and Japan then so be it”, he said in the interview. As for AirAsia X’s pending aircraft orders, Fernandes said the group was discussing with Airbus to restructure its order book. “We’ve been a customer of Airbus for a long, long time. And so we’ll both be professional about it and get out a win-win situation,” he said. “The reality is that I don’t think many airlines are going to take new planes in the next few years. AirAsia is one of them.”

AirAsia Group CEO Tony Fernandes. (PHOTO: Shutterstock)

AirAsia X said earlier in August that it was “in active engagement” with its creditors to reschedule payments and reduce costs as well as to renegotiate terms of contracts as it tries to survive the global aviation shutdown brought on by the COVID-19 pandemic. In its statement, it also said it suffered a second-quarter net loss of net loss of RM305.2 million (US$73 million) compared to a net loss of RM207.1 million for the same quarter a year earlier.

Air Asia X said as part of its survival plans it is continuing to “push through numerous digitalisation initiatives that are being implemented across the wider AirAsia Group which will boost uptake for ancillary and freight services and further reduce costs”, but added that it remains in “hibernation” and is maintaining only minimal operations in support of the repatriation of travellers and transportation of cargo. Seat capacity and the total number of passengers carried during the quarter were recorded at 6,032 and 2,291 respectively, while Passenger Load Factor was recorded at 38 percent. This came on the back of flights ferrying cargo with minimal passenger take-up during the month of April 2020.

The company’s affiliate in Thailand recorded revenue of US$4.7 million and the number of passengers carried during the quarter stood at 309 while seat capacity was recorded at 377. AirAsia X Thailand reported a net loss of US$54.2 million for the quarter.

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