AAX Creditors ‘Haircut’ Scheme Receives Favourable Approval

AirAsia X Scheme of Arrangement with creditors in each of the three classes Class A and Class C received 100% vote while Class B received 97.6%. The beleaguered airline of AirAsia which operates international travel has been struggling due to financial restraints.

Under its debt restructuring proposal, it was reported that the airline is proposing to pay only ).5% of its debt and terminate all contracts in order for it to restructure the RM33.65 billion of liabilities.

Once approved, the airline will embark on its recapitalisation which was approved by its shareholders in June 2021. Completion is expected in the first quarter of 2022 after which the airline will be well poised to compete very effectively in the markets where it will operate.

AAX face stiff objection when the proposal was presented initially, however, through a process of many transparent discussions and alignment of common business interests, all major creditors have agreed that the combined interests of the various groups of stakeholders.

Unlike other aviation restructurings completed recently, the AAX scheme is all encompassing, comprehensive and covers all creditors without being restricted to a particular class or groups of creditors. With the completion of this exercise, AAX will be one of very few airlines worldwide that has no gearing and a restructured cost base that is significantly below that of its competitors in the region and will be in an excellent position to capture leisure travel and cargo opportunities post-Covid.

Calls have been placed on AAX to be liquidated labeling it moribund and terminally ill, but the support given by international aviation creditors with very substantial amounts owing supporting the restructuring at very great costs to themselves shows the appeal the airline has.

Since its establishment from 2007 to 2020, the airline has carried a total of 43.5m passengers, employed 2,364 staff, 76% of whom are Malaysians. In 2019 it brought in 1.91m international tourists into Malaysia which translated to a RM78.8b contribution to the Malaysian economy in 2019 alone based on the commonly applied multiplier of 12.5 times. AAX is also a consumer of the services of airports and a wide range of goods and services from local suppliers and between 2015 and 2020, over RM5.3b was paid to local suppliers.

Through an aggressive process of cost containment and seeking of alternative sources of revenue,  the cash burn in the 10 months year to date to October 2021 was a total of RM34m which works out to a monthly cash burn of only RM3.4m or USD800,000. AAX currently operates four wide body A330’s for its regional cargo flights with a further two to be operational by year end. It has begun operating dedicated belly cargo flights for several of the largest global freight companies with ongoing discussions for belly cargo agreements on passenger/cargo combination flights when borders reopen.

Tan Sri Rafidah Aziz, Chairman of AAX “We would like to thank all our furloughed pilots, crew and support staff and assure them that all of them will be further brought back to full employment in the coming months as borders open up.”

“We wish to assure all passengers affected by the restructuring that it is the firm intention of AAX to put in place travelling privileges in the form of travel credits, which can be utilised for future purchases of flight tickets once international borders reopen,” added Tan Sri Tony Fernandes, Co-founder and Director of AAX.

The Company was advised by Foong and Partners, Mercury Securities, Gopal Sreenevasan, Suhendran Sockanathan and Simon Hong.  New York based Seabury Securities and the Singapore office of Bird and Bird provided specialist aviation restructuring and legal support required to successfully complete the scheme of arrangement.

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