Malaysia's budget airline AirAsia X runs out of money
The airline is seeking to raise $120.6m through fresh equity to survive the Covid-19 pandemic, deputy chairman says
Long-haul, low-cost carrier AirAsia X has run out of money and needs to raise up to 500 million ringgit ($120.6m) to restart the airline as it fights to survive the coronavirus pandemic that has left the airline's planes grounded since March, deputy chairman Lim Kian Onn said on Saturday.
The Malaysian airline, the long-haul arm of AirAsia Group, said this month it wanted to restructure 63.5 billion ringgit of debt and slash its share capital by 90 per cent to continue as a going concern.
"We have run out of money," Mr Lim told The Star newspaper. "Obviously, banks will not finance the company without shareholders, both old and new, putting in fresh equity. So, a prerequisite is fresh equity."
He said the airline had actual liabilities of 2bn ringgit, with the larger figure of 63.5bn ringgit including all lease payments for the next eight to 10 years and its large order for Airbus planes and contracted engine maintenance with Rolls-Royce Holdings.
"If we find RM300m in new equity, then the shareholder funds are RM300m at the restart of business and if we are able to borrow RM200m, we feel that we will have a good platform to start all over again."
Mr Lim said AirAsia X also needed to convince its lessors of its business plan, adding an unnamed lessor recently took back one of the airline's planes to convert it to a freighter.
The airline plans to liquidate its small Indonesia-based carrier and has completely written down its 49 per cent stake in Thai AirAsia X in its books, with the Thai carrier not part of the restructuring scheme, Mr Lim added.
Initial negotiations with creditors have been tough as they are understandably upset, Mr Lim said in the interview. They had asked for better terms, including free equity for forgiven debt – something that would be impossible for the airline to fulfill, he said.
Still, Mr Lim said all of them genuinely wanted to find a common ground to take the airline forward. “No one has anything to gain from our demise,” he said.
The airline is planning to resume flights in the first quarter, though the process remains “dynamic”, Mr Lim said. Should the rescue plan get approval, the company will have to renegotiate every single contract and will do its best to look after all stakeholders’ interests, he said.
Rival Malaysia Airlines is also in financial trouble, but Mr Lim said there would be "no good outcome" from seeking to merge two airlines in dire straits.
Last week, the International Air Transport Association renewed its call for governments to extend financial support to airlines to help them overcome the coronavirus-induced crisis. The organisation estimates that airline revenues will halve to $419bn in 2020 due to the crisis.
Updated: October 17, 2020 03:59 PM