AirAsia X’s debt restructuring may cost Airbus RM20b


AIRCRAFT manufacturer Airbus SE could lose more than US$5 billion (RM20.3 billion) worth of aircraft orders if AirAsia X Bhd’s (AAX) debt restructuring scheme goes through, Reuters reported yesterday.

Citing court documents, Reuters noted that Airbus has already built seven aircraft ordered by the airline.

According to the report, the termination of agreement via the restructuring scheme would cost the plane manufacturer multi-billion ringgit.

The news agency said in an affidavit filed to the Kuala Lumpur (KL) High Court on Dec 16, in which Airbus Asia-Pacific head of region Anand Emmanuel Stanley said there was a strong possibility that Airbus “will suffer substantial losses and prejudice” from the termination of purchase agreements.

Anand said AAX has ordered and Airbus has already built, or substantially built, seven A330neo aircraft which are currently in inventory.

Additionally, he said there are another 71 on order that may impact Airbus’ profitability if cancelled.

In an affidavit on Dec 17, Reuters said AAX revealed it owes Airbus RM48.71 billion including pre-delivery payments for the committed purchase of 118 aircraft.

The report further said Airbus’ challenge comes as AAX defended its scheme from key lessor BOC Aviation Ltd’s (BOCA) allegations that it favoured Airbus and lacked a debt-to-equity swap offer for creditors.

BOCA said AAX’s debt calculations should not include future debts, which are primarily owed to Airbus in which the planemaker alone holds about 75% of the total debt value needed to approve the restructuring, giving lessors relatively little say.

According to Reuters, AAX senior legal counsel Shereen Ee had denied the calculations as unfair as they also considered termination compensation for BOCA until the end of its lease period.

BOCA is AAX’s largest lessor, the airline’s lawsuit showed.

As for BOCA’s proposed debt-to-equity conversion, Ee said it “would run counter to the objective of restructuring AAX to ensure it can raise fresh funds to continue as a going concern”.

She said any party may have an equity stake in AAX if they inject fresh funds in return for it.

The long-haul carrier sank deeper into the red in its third-quarter ended Sept 30, 2020 (3Q20), with net loss expanding to RM308.46 million from RM305.24 million in the immediate preceding quarter due to travel ban as the Covid-19 pandemic persists.

To ease the debt and ensure the carrier can fly again next year, AAX pointed to the debt restructuring scheme in October.

It emphasised that successful implementation of the scheme is critical for it to be able to raise new funding via either debt or equity.

Under the debt restructuring scheme, the airline proposed that the RM63.5 billion it owes scheme creditors to be restructured and reconstituted into an acknowledgement of indebtedness by AAX for a principal amount of up to RM200 million, payable annually over a period of up to five years via three equal payments from the third to the fifth year of the scheme’s implementation.

However, BOCA asked the KL High Court to dismiss AAX’s debt restructuring scheme as it rules out a debt-to-equity swap and gives too much power to Airbus as a creditor.

The airline, which has been posting losses since June 2019, said the alternative was to face liquidation with no returns to creditors. It is now seeking court approval to convene a meeting with creditors to vote on the scheme, Reuters reported.

Meanwhile, AAX in response said it would continue engaging with all creditors and stakeholders to expedite the completion of “this recapitalisation”.

The airline said the alternative was a liquidation with nothing for creditors and shareholders.

The airline’s legal counsel Ee said the scheme would “at least offer creditors a prospective chance for survival”, as reported by Reuters.

AAX closed at seven sen yesterday, down by 0.5 sen.