AirAsia X Cutting Indonesia Arm

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Embattled Asian low-cost airline AirAsia X is verging on the brink of collapse and is shutting down its Indonesian long-haul arm in an attempt to cut costs and save the wider business. AirAsia X needs more than US$100 million to avoid liquidation. But the question is, from whom or where is that money going to come?

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It’s the end of the road for Indonesia AirAsia. Photo: Getty Images

“We have run out of money,” AirAsia X deputy chairman Lim Kian Onn told Malaysian media outlets on the weekend.

“Obviously, banks will not finance the company without shareholders, both old and new, putting in fresh equity. So, a prerequisite is fresh equity.”

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The end of the road for AirAsia X Indonesia?

People familiar with AirAsia will know there’s AirAsia and various iterations of AirAsia. The original AirAsia, formally known as AirAsia Berhad and helmed by Tony Fernandes, is based in Malaysia. Over the years, various affiliate airlines have spun off the Malaysian mothership. They share the AirAsia name and branding but are based elsewhere and separate corporate entities. The original AirAsia typically has a significant stake in the affiliate AirAsia airlines.

While reports suggest the airline will stop operating, AirAsia provided Simple Flying with the following statement:

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In reference to recent media reports referring to AirAsia X Indonesia (airline code XT), the airline confirms that while it is known that it ceased operating scheduled services in January 2019, no liquidation proceedings have commenced.

AirAsia Indonesia (airline code QZ) continues to operate domestic and international services. 

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There won’t be much smiling for Indonesia AirAsia employees who will lose their jobs. Photo: Getty Images

Low-hanging fruit for the Malaysian mothership

AirAsia X Indonesia never really scaled up and could be seen as low hanging fruit in the scramble to cut costs and save broader interests. The airline flies two A330 widebodies and previously served destinations as far afield as Australia and India.

Its two domestic destinations, Denpasar and Jakarta, continue to be served by AirAsia Indonesia, which is a separate entity from the long-haul AirAsia X brand.

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2020 may end up clipping the wings of AirAsia’s perpetually buoyant CEO, Tony Fernandes. Photo: Getty Images

Serious ongoing liquidity issues at AirAsia

AirAsia is facing a serious cash crunch. They have immediate liabilities approaching $500 million. As Lim Kian Onn indicates, there’s no money to pay the bills. Over the next decade, there’s something like $14 billion in liabilities due – aircraft leases, contracted maintenance, new orders, and the like.

“There are many lessors, some very big ones too,” said Lim Kian Onn. “We have been talking to them for two months. All of them are understandably upset.

“There are analysts and news reports that suggest creditors, particularly lessors, have no choice but to agree to our scheme. That’s not true. They have choices.”

Meanwhile, in addition to closing down Indonesia AirAsia and dealing with angry aircraft lessors, AirAsia Berhad has written off its 49% stake in Thai AirAsia. That airline is no longer part of AirAsia Berhad’s “restructuring plans.” Just a week ago, AirAsia’s Japan-based affiliate airline closed with immediate effect.

What do you think? What’s the future for AirAsia? Has 2020 finally clipped the wings of the ever-ambitious Tony Fernandes? Post a comment and let us know.

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