Malaysian carrier AirAsia is set to merge with its medium-haul arm AirAsia X under a new name - AirAsia Aviation. Holding company Capital A suffered major losses over the pandemic and will now implement significant restructuring to steady the ship. Let's take a closer look at this story below.

AirAsia and AirAsia X to merge

Capital A Berhad, the corporate name of the AirAsia group airlines, will merge its AirAsia carriers with its medium-haul offshoot AirAsia X. The group operates its primary low-cost AirAsia airline alongside subsidiaries Indonesia AirAsia, Philippines AirAsia and Thai AirAsia, coupled with medium-haul carriers AirAsia X and Thai AirAsia X.

The new entity - AirAsia Aviation - will be headed by long-time executive Bo Lingam, while Group CEO Tony Fernandes will be in charge of Capital A, which is set to run the digital, logistics and aviation services businesses. The proposal will likely be submitted to Bursa Malaysia Securities by February next year.

Fernandes said,

"From what looked like a very sick airline, we've saved it. We are refloating it and listing it as an independent listed vehicle."

As part of the restructuring effort, AirAsia Aviation would consider a dual listing in the United States or another Asian country and has its eye on establishing new carriers in local countries, including Vietnam and Cambodia. Capital A will look at listing its maintenance and catering services in Singapore, where it would compete with the likes of Singapore Technologies Engineering (STE).

Lifting distressed status

The merger is motivated in large part by Capital A's 'Practice Note 17' (PN17) status, which is applied to companies in Malaysia in financial distress. AirAsia X has also been given PN17 status, despite reporting its first net profit for three years over the last quarter.

In an interview with Reuters, Group CEO Tony Fernandes said this has had a "major impact" on the airline by affecting investor confidence. However, Fernandes claims that both entities will hopefully drop their distressed status by July 2023 when the restructuring plan comes to fruition.

As reported by the New Strait Times, Fernandes added,

"We have worked very hard to develop a plan to address the PN17 status as a key part of our post-pandemic recovery journey. Together with our partners, financial and legal advisors, we are finalizing a scheme, subject to regulatory and other necessary approvals. We anticipate this scheme to not only uplift us from the PN17 status but also unlock enormous value for the shareholders of Capital A and, ultimately, lead us to a healthier financial standing and profitability."

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Fleet bottlenecks

AirAsia revealed in August that it planned to return approximately 160 of its 205 aircraft to service by the end of the year. However, it has slashed this figure to around 140 aircraft as it faces maintenance backlogs having grounded so many planes over the pandemic.

AirAsia A320 taking off
Photo: Getty Images

The Malaysian airline group is on the road to recovery following a difficult year that has seen its share prices plunge by 25%, despite competitors Singapore Airlines and Cathay Pacific posting share increases. The airline group served 9.9 million passengers in the last quarter, although this is still only 54% of its pre-pandemic capacity.

What are your thoughts on AirAsia's restructuring? Do you think this will help the airline? Let us know your insights in the comments.

Source: Reuters, New Strait Times

  • AirAsia Tile
    AirAsia
    IATA/ICAO Code:
    AK/AXM
    Airline Type:
    Low-Cost Carrier
    Year Founded:
    1993
    CEO:
    Tony Fernandes
    Country:
    Malaysia
    Hub(s):
    Kuala Lumpur International Airport
    Region:
    Asia