AirAsia X Announces Restructuring Plan Amid Crisis

AirAsia X is in a difficult position. As such, the carrier announced on October 6th a restructuring plan that should hopefully keep the airline afloat and running for years to come with an equity injection. The restructuring plan should see the airline making structural changes to get out of the current crisis, including fleet right-sizing and some shedding of jobs.

AirAsia X
AirAsia X has announced a restructuring plan that will require a right-sizing of the fleet. Photo: Airbus

The situation at AirAsia X

AirAsia X is, according to the airline, “facing severe liquidity constraints.” This is due to closed international borders and travel restrictions that have grounded all scheduled flights. The low-cost long-haul airline also does not see any imminent return to normalcy. In the first quarter, the airline notched a $130 million net loss.

A bigger problem for the airline, however, is the imminent default of contractual commitments that will precipitate the highly unfortunate potential liquidation of the airline. So, the airline is taking steps such as renegotiating its financial obligations and a major debt restructuring before it raises any fresh equity it needs to restart long-haul operations.

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Thai AirAsia X Airbus 330-300 on final at Tokyo Narita
Long-haul international demand is at its lowest point in recent history, leading AirAsia X to maintain suspended operations. Photo: Getty Images

The restructuring plan

The restructuring plan comes in four parts:

  1. Debt restructuring scheme: this includes a proposed debt settlement and waiver of debts involving unsecured creditors. The airline notes it must address its debt obligations first and in an orderly fashion to get to a sustainable debt structure.
  2. Revision of the Group’s business plan: this involves a route network rationalization, aircraft fleet right-sizing, cost base overhaul, and workforce optimization, all aimed at ensuring a leaner and more sustainable business.
  3. Engagement with business partners: AirAsia X needs the support of its business partners. The airline does not want to lose its relationships built up pre-restructuring and hopes to enter into contracts or agreements that support the airline’s revised business plan once the restructuring is is completed successfully.
  4. Airline customers and travel agents: AirAsia Unlimited Pass holders and guests with valid flight bookings will receive travel credits with extended validity for future travel or purchasing seats.

AirAsia X has appointed Dato’ Lim Kian Onn, a chartered accountant and former investment banker, to lead the airline restructuring. He has also been a member of the AirAsia X board since 2012.

AirAsiaX Airbus A330 getty images
Operating a fleet of Airbus A330s, the airline was on the verge of a major expansion plan with over 100 aircraft on order. Photo: Getty Images

Route network rationalization and fleet right-sizing

Two of the most ubiquitous phrases in airline restructuring or crisis management plans right now are “route network rationalization” and “right-sizing.” Essentially, this means airlines are planning on becoming smaller, and some routes that were viable in 2019 but not now will be cut.

In terms of fleet, AirAsia X only operates widebody Airbus A330-300s. However, the carrier has a robust order book with 78 Airbus A330-900neos, 30 Airbus A321XLRs, and 10 Airbus A350s on order. The nearly 40-strong fleet of A330-300s will likely see some retirements– especially with many of those aircraft on lease as the airline replaces them with newer, more fuel-efficient Airbus A330-900neos.

The A321XLR might not see cuts, as the future right now is long-haul lean flying, which the A321XLR is great for. One order that might be chopped off is the order for 10 A350-900s, which the carrier placed over ten years ago and has yet to take delivery of even one of yet. These planes might also be a little too big for a low-cost long-haul carrier. And, with the A330neo already in the Group’s fleet, it does not make a lot of sense for the airline to step away from the type unless it wants to completely back away from the model.

AirAsia X A350
AirAsia X has 10 A350s on order. Photo: Airbus

For now, the airline has some bigger things to worry about– like completing a successful restructuring. Expect rationalizations and fleet right-sizing to occur as the airline undergoes a restructuring. Only then will the true future of AirAsia X be revealed.

What do you make of AirAsia X’s plan? Let us know in the comments!