Struggling budget carrier AirAsia is getting a break from Airbus as the European planemaker has reportedly agreed to cut prices or reschedule the delivery of aircraft. News of this restructuring came on Friday, which will be much-welcomed news for AirAsia. The deal, which involves hundreds of Airbus A320-family aircraft, is worth tens of billions of dollars.
AirAsia and Airbus have worked closely with one another over the past decade. Some of the airline's earliest and oldest A320s were delivered in 2006, with the airline becoming an all-Airbus in the years following as it phased out older Boeing 737s.
Placing a number of significant orders for its various subsidiaries across Asia, the Malaysia-based group has hundreds of A320-family aircraft yet to be delivered. Indeed, in 2019, AirAsia agreed to upsize its future A320-family fleet, converting 253 orders for the A320neo to the larger A321neo version. In total, AirAsia had orders for 592 A320 Family aircraft in 2019, including 353 A321neos.
Restructuring a major deal
Abruptly stopping the budget airline's momentum and growth, the global health crisis hit hard, shutting down the majority of travel around the world. AirAsia was not immune to this, suffering from travel restrictions implemented by its home countries.
It's in this challenging climate that the low-cost carrier has sought to renegotiate its deal with Airbus. Reuters reports that this has successfully happened, with an industry source saying on Friday that a deal has been reached to cut prices or reschedule delivery of undelivered aircraft.
It was last year, in late April, that AirAsia announced that it would stop taking deliveries of Airbus jets, reviewing its outstanding orders at the same time. Months later, additional moves would indicate the seriousness of the airline group's situation. The AirAsia Group would move to close its Japan subsidiary, restructure its AirAsia X subsidiary, and decrease its stake in its Indian subsidiary.
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Undelivered jets
It was made clear by sources that this revised AirAsia deal does not involve the cancelation of undelivered jets. Rather, it includes a new delivery schedule, price cuts, or other improvements in terms.
Sources also report that AirAsia has halted progress payments (incremental payments for undelivered aircraft) to Airbus. This has prompted Airbus to suspend plans to produce aircraft on order pending the revised deal.
According to ch-aviation.com, 354 Airbus jets remain undelivered. This divides into five A320neos and a whopping 349 A321neos. The airline had been steadily taking deliveries of these new jets in recent years, with the newest A321neos delivered to AirAsia (Malaysia) in November and December of 2019. Thai AirAsia also took accepted two A321neos around the same time.
What do you think of this new, restructured deal? Have you ever flown on AirAsia? Let us know by leaving a comment.