Two lessors involved in negotiations with Malaysia Airlines (MAB) have told Airfinance Journal that the airline may have some success with its "audacious" request to shave up to 75% of its annual lease bill.
“The proposed plan is quite audacious indeed. If we were to accept, it basically means a 75% rental income loss for us, per aircraft, compared to what we used to get,” an executive at a USA-based lessor tells Airfinance Journal.
“We have of course seen quite a few - let’s call them 'interesting' - requests or right-out demands since the beginning of this year but this is the best one yet,” he adds.
In its letter to lessors MAB suggested that owner Khazanah Nasional had told the airline to reach a new deal with lessors or face liquidation.
MAB has threatened to restructure under Part 26A of the UK Companies Act of 2006, which has the potential to force lessors to agree to its terms.
“Of course we are saying no, but the concern is that if just a single of our competitors agrees for whatever reason, or given whatever motivation, then we will likely be forced into submission by the courts. It’s outrageous really, but it is what it is.
“Even if they don’t succeed in the UK courts, they will apply for protection in Kuala Lumpur and likely be granted whatever they ask,” another lessor with several aircraft placed with MAB tells Airfinance Journal.
MAB will be unable to pay its rents after November without fresh funds from Khazanah, but Khazanah says it will only inject more money into MAB if the airline reaches new lease agreements.
MAB parent MAG had liquidity of $88 million as at 31 August and at the time said it could draw an additional $139 million from its sovereign wealth fund owner.
According to the letter sent to the leasing community, Khazanah is ready to inject another $1 billion into MAB if the lessors agree to the lease restructurings. Additionally, it was noted that Khazanah would also capitalise at least $1 billion of shareholder advances.
If no agreement with the lessors is reached, MAB will go to the courts to formally restructure.
MAB was restructured before, from Malaysia Airlines System (MAS) to its current form. One option may be to abandon the MAB brand, air operator's certificate (AOC) and all its legacy debts in favour of a fresh start under the AOC of Firefly, a group subsidiary.
MAB leases 75 aircraft: six Airbus A350-900s, 21 A330-300 and -200 variants, and 48 737-800s.
Air Lease (ALC) has by far the largest exposure to MAB in terms of asset values, listed at $710 million by Fleet Tracker, followed by NBB Leasing, Standard Chartered, Aercap and Goshawk.
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