AirAsia X restructuring, says it’s facing ‘severe liquidity’ problems due to pandemic shutdown

AirAsia X announced on Tuesday (6 October) that it was instituting a restructuring plan that it hopes will help it attract an injection of fresh equity that will allow the airline to fly again. The airline appointed Lim Kian Onn as its deputy chairman to lead the restructuring. He is a Chartered Accountant and was an investment banker and has been a board member of AirAsia X since 2012. “AirAsia X is facing severe liquidity constraints,” the airline said in its announcement. “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. 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 airline said its board and management “have assessed various options and propose a restructuring plan, which if approved, will secure the airline’s continued ability to fly again”. The plan includes: Debt Restructuring Scheme: Proposed debt settlement and waiver of debts involving unsecured creditors, aimed at enabling the Group to address its 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: Route network rationalisation, aircraft fleet right-sizing, cost base overhaul and workforce optimisation, all aimed at ensuring a leaner and more sustainable business going forward; Engagement with Business Partners: Key success factors to the proposed 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 customer 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 company said its plan and any agreements it makes will be “aimed to right-size the group’s level of operations and financial obligations, which is crucial to the group’s continued existence in the aviation landscape. These exercises are pre-requisite for the raising of any fresh capital, comprising both equity and debt needed to implement the group’s revised business plan”. The company said it has had “extensive discussions with all major creditors” and while there “are varying degrees of support for the restructuring scheme as has been proposed, all of them have expressed strong support for a continuation of the airline business”. AirAsia X CEO Benyamin Ismail said “AirAsia X and other airlines the world over are struggling to survive amid the global crisis of COVID-19 pandemic. We remain committed to our guests, Allstars, business partners and shareholders to ensure we build a viable and sustainable airline for the long-haul, and for the survival of this airline, the proposed restructuring plan is our only option. 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.” For Editorial Inquiries Contact: Editor Matt Driskill at [email protected] For Advertising Inquiries Contact: Head of Sales Kay Rolland at [email protected]