AirAsia X’s restructuring scheme a tougher sell to creditors compared to MAB

By RAHIMI YUNUS / Pic RAZAK GHAZALI

AIRASIA Group Bhd’s affiliate, AirAsia X Bhd (AAX), would face more challenges in convincing creditors to agree to its restructuring scheme compared to Malaysia Airlines Bhd (MAB) that reached a court sanction milestone as the latter has support from the state while the former does not.

Pangolin Investment Management Pte Ltd director Mohshin Aziz said globally, state-owned airlines (owned either directly or indirectly) are more favoured by lessors and creditors in restructuring talks as they believe such carriers have a higher chance of surviving the crisis with a financial lifeline from the government.

“Pure commercial entities like AirAsia are in a much-disadvantaged position because the avenue for government assistance is not yet at hand. They have to work harder to get money from the market,” Mohshin told The Malaysian Reserve (TMR).

While aircraft lessors may have limited options with its assets if they decided to take it back from AAX, he said they might want to give some breathing rooms to AAX, get on board with the proposals tabled and let the cash strapped airline carry on with its restructuring during this difficult time.

Similarly, Hong Leong Investment Bank Bhd analyst Daniel Wong said MAB received creditors’ support mainly due to the strong backing from Khazanah Nasional Bhd, but the restructuring of AirAsia and AAX is still subject to the commitment of shareholders putting in more capital.

He said the prospect of recovery in air travel remains a fundamental factor that affects airlines’ survivability and cashflows.

“The survivability of MAB and other regional national airlines may continue to post competitive pressure to AirAsia,” Wong told TMR.

He said the Covid-19 vaccination programme, which started yesterday, seemed to provide some hopes to the sector and likely a strong recovery if things pan out smoothly by year-end.

The High Court in Kuala Lumpur recently ordered AAX to convene meetings with creditors within 180 days, or six months, to get its restructuring plan to be considered and approved.

The court also separated 14 creditors into three classes, the first being Malaysia Airports Holdings Bhd (MAHB), the second comprises other creditors, while the third is Airbus SE.

AAX’s initial proposal was to restructure over RM60 billion of debts into an “acknowledgement of indebtedness” for up to RM200 million across a single class of unsecured creditors.

In January, Reuters reported 15 of the 20 aircraft lessors agreed to keep working with the airline rather than see it fold, while BOC Aviation Ltd and MAHB were among the holdouts.

Hong Kong businessman Stanley Choi Chiu Fai recently emerged as a substantial shareholder of AirAsia with a 8.96% stake bought for RM114 million via his private vehicle Positive Bloom Ltd.

Mohshin and Wong viewed Choi’s investment in the low-cost carrier as long-term driven by the potential of the low-cost travelling segment in the region.

AirAsia’s shares initially rose on news about Choi raising his equity, but were not sustained with the counter closing at 90 sen yesterday, down 4.74%, giving it a market capitalisation of RM3.36 billion.

AAX’s shares also ended lower by 15% to 8.5 sen yesterday, valuing the company at RM352.6 million.

Read our previous report

Reprieve for MAB, but hurdles ahead