Capital A to divest aviation business to AirAsia X to strike off PN17 status

CAPITAL A Bhd is planning to divest its aviation businesses, namely AirAsia Bhd (AAB) and AirAsia Aviation Group Ltd (AAAGL), to AirAsia X Bhd (AAX), as part of its corporate strategy designed to shed its financially distressed status.

“Together with our partners, financial and legal advisors, we are finalising a scheme, subject to regulatory and other necessary approvals, that we anticipate will not only uplift us from the Practice Note 17 (PN17) status, but also unlock enormous value for the shareholders of Capital A, and ultimately, lead us to a healthier financial standing and profitability,” Capital A CEO Tan Sri Tony Fernandes said in a statement yesterday.

He said the scheme would not involve shareholders’ value dilution.

“In essence, the scheme will result in a clear separation between Capital A’s three main portfolios of businesses, namely the aviation group, the digital businesses and the logistics plus aviation services,” he added.

The plan envisaged will entail the disposal of Capital A’s aviation businesses, namely AAB and AAAGL, to AAX.

“The shares consideration, received in exchange for the disposal, will then be distributed to Capital A shareholders, so that they will retain a direct interest in the aviation businesses via AAX, following the restructuring.

“In essence, via this scheme, Capital A’s shareholders’ value will be preserved. Capital A will be rebranded as an aviation services and digital group, post the disposal and distribution exercises.

“We envision a separate spin-off listing in the future for the aviation services businesses of Capital A once the PN17 status is resolved,” he said.

Capital A is seeking an extension of time from Bursa Malaysia Securities Bhd to submit a holistic regularisation plan to remedy its PN17 status.

“The board of directors of the company wishes to announce that the company had on Nov 29 submitted an application to Bursa Securities for an extension of time of six months until July 7, 2023, for Capital A to submit its regularisation plan to Bursa Securities,” Capital A said in a filing with Bursa Malaysia.

Meanwhile, in a separate statement, AAX CEO Benyamin Ismail said AAX was progressing well on its regularisation strategy to uplift it from the PN17 status.

“The strategy being formulated is expected to entail a proposed acquisition of Capital A’s aviation arm, AAB and AAAGL, comprising AAAGL’s respective shareholdings in AirAsia Indonesia, AirAsia Philippines and AirAsia Thailand. 

“Following the acquisition, AAB, AAAGL and AAX will form a consolidated aviation group, subject to the approval of our stakeholders and relevant regulatory authorities,” he said.

While all airlines under the consortium will remain separate with regard to the operations, Benyamin said, the acquisition of the short-haul airlines under one consolidated group will create synergies with AAX’s mid-range operations.

“Leveraging the group’s wide network of over 130 destinations will provide us the opportunities to expedite our recovery after the completion of the regularisation plan.

“The strategy is not only expected to strengthen our balance sheet and cashflows but create value for the company as well as our shareholders in the longer term,” he added.

Subject to receiving the requisite approvals necessary for the proposed regularisation plan, including from AAX board of directors, Bursa Malaysia Securities, AAX shareholders and other relevant authorities, AAX expects to complete the implementation of the regularisation plan by July 2023.

Recently, AAX has charted a cash balance of RM79.5 million for its fifth quarter ending Sept 30, 2022, more than tripled compared to RM25.1 million in the preceding quarter. AAX also posted earnings before interest, taxes, depreciation and amortisation (Ebitda) of RM25.4 million while profit before tax for the period stood at RM23.8 million. — TMR / pic source