Despite recent claims from Air Asia X that it required a MYR63.5 billion ($15.2 billion) ‘haircut’ from creditors, this number is a massive inflation of the airline’s actual debt, Airfinance Journal data shows.
The data shows that the airline’s balance sheet debt is slightly less than $1.6 billion, $1.5 billion of which is operating lease liabilities.
The much-publicised $15.2 billion figure is mostly the value of aircraft it has ordered, which would never crystalise into a claim of that size.
A source tells Airfinance Journal: “A claim for liquidated damages would probably be limited to profits lost and any specific out-of-pocket expenses incurred by Airbus. Airbus would be obliged to mitigate their losses. I am not sure why AAX have been seeking to inflate the public number.”
Another source adds: “And why would Airbus seek massive damages from them? I am sure they won’t unless things really blow up between them. Air Asia as a group is one of their top customers. They don’t want to ruin that unless absolutely necessary.”
Air Asia X is the biggest customer of the A330neo, having ordered 78 A330-900 aircraft. It also has placed orders for 10 A350-900s and 30 A321neos. Parent Air Asia has another 363 A320neo-family aircraft on order from Airbus.
On 6 October, the Malaysia-based carrier proposed that MYR63.5 billion of debts owed to unsecured creditors be reconstituted into an acknowledgement of indebtedness by Air Asia X for a principal amount of up to MYR200 million, an amount it said “the group’s future operational cash flows may accommodate”.
The MYR200 million of reconstituted debt would be repaid annually over up to five years via three equal payments from the third to the fifth anniversaries of the implementation of the restructuring.
“The debt settlement amount shall be unsecured and carry an interest rate of 2% per annum payable in arrears, commencing on the anniversary of the implementation date of the proposed debt restructuring,” Air Asia X said in the filing.
The carrier also wants to consolidate every 10 existing Air Asia X shares into one, while raising MYR500 million in fresh funding, including equity and a government-guaranteed loan.
The proposal, which requires approvals from investors and creditors, would reduce shareholder capital at Air Asia X by 90%, according to the exchange filing. Air Asia X said this is the only way for the airline to survive and emerge from its hibernation.
Air Asia X reiterated that it needs to “right-size” its fleet and rationalise its network going forward.