AirAsia X, a chronically money-losing widebody operator based in Kuala Lumpur, asked this week its debtors to waive 99.7% of its outstanding obligations of 63.5B MYR.
The shareholder’s equity is negative, and the company’s current liabilities of 3.38B MYR are more than double those of its current assets. The company, in essence, is insolvent.
AirAsia X hopes to restart operations with just two aircraft in the first quarter of 2021.
The airline has ordered 118 planes from Airbus that are due out for delivery this decade. It is difficult to see any of these materializing.
Here’s the AirAsia X’s plan that it has filed with Malaysia’s stock exchange where it is listed:
Conclusion
Why would debtors bail out an airline that was not profitable even during the best of times? Now, AirAsia X would want to wipe out more than $15B of outstanding debt and lower share capital by 90%,
Neither of these two actions brings more money in that the airline desperately needs.
It is challenging to see much need for regional medium-haul flights that AsiaAsia X operated before 2022 when Covid-19 is hopefully behind us and travel restrictions between countries removed.
Building business over an ever-increasing debt load may work during the best of times, but you run into trouble whenever we have these “once-in-a-lifetime” events at least every decade.
The right course of action with AirAsia X would be to liquidate the airline and allow another billionaire to start one and become a millionaire in the process.
