AirAsia to explore options for long-haul unit AirAsia X

Pic by TMR

MALAYSIA leading budget carrier, AirAsia Group Bhd, is weighing options for its long-haul unit AirAsia X Bhd including introducing a financial investor to help shore up the unit’s finances, according to people familiar with the matter.

AirAsia is also studying alternatives including getting support from Khazanah Nasional Bhd or integrating AirAsia X into the group, the people said.

“Apart from that, shuttering AirAsia X could also be one of the options,” said the people, who asked not to be named as the discussions are private.

According to the people, AirAsia, founded by entrepreneur Tan Sri Dr Tony Fernandes, has been in talks with investment banks about strategic options for the long-haul unit, which reported a net loss of about RM490 in 2019.

“The discussions began even before the Covid-19 pandemic disrupted global travel,” another source said.

“Bond issuance to boost the unit’s financing has also been considered,” the source added.

Deliberations are at an early stage, and the company has not made any final decisions about its course of action, the people said.

Representatives from AirAsia and Khazanah had declined to comment.

AirAsia’s long-haul arm suffered a setback in November when the US Federal Aviation Administration (FAA) banned Malaysian carriers from adding new US routes.

The airline, however, kept its flights to Honolulu via Osaka, making it the only Malaysian carrier that flies to the US.

Months of pro-democracy protests in Hong Kong have hurt the group’s finances too as fewer visitors flew to the former British colony as well as its neighbouring cities of Macau and Shenzhen.

The recent Movement Control Order in Malaysia which has been extended to April 14 as coronavirus cases jumped, adding more uncertainties to AirAsia’s business.

AirAsia recently sold passes that would allow passengers to take unlimited number of flights in a year for RM499.

This pass also allows the customers to pick long-haul routes such as between Malaysia and Australia.

The company last week reinstated Fernandes as its CEO after an independent inquiry cleared him of any irregularities related to the purchase of Airbus SE planes and sponsorship of a sports team.

His longtime business partner, Datuk Kamarudin Meranun, also resumed his position as the group’s executive chairman after the probe.

Airlines worldwide could lose US$252 billion (RM1.09 trillion) in revenue this year from the Covid-19 pandemic, threatening the survival of the industry, according to the International Air Transport Association, the largest global airline trade group.

Bloomberg News reported on Wednesday that Malaysia is exploring the possibility of bailing out domestic airlines hit by the outbreak.

One of the ideas being explored is setting up a vehicle to take over the debt of companies like Malaysia Airlines Bhd and AirAsia, people familiar with the matter said. — Bloomberg