AirAsia X offers 0.5% deal to settle RM600mil debt to passengers, agents
The long-haul budget airline warns creditors will get nothing, if it fails to get approval for its debt restructuring proposal on Nov 12 and is forced into liquidation.
PETALING JAYA: Thousands of passengers who have credits with AirAsia X (AAX) are likely to get back only 0.5% of the amount owed to them under the carrier’s proposed debt restructuring exercise which will be put to vote on Nov 12.
The airline said if it is approved, the exercise will be a full and final settlement and the company will not be liable to any legal action from any creditor after that.
However, it warned that AAX is expected to go into liquidation if it fails to get the nod, according to the explanatory statement cited by FMT.
To illustrate how much passengers can expect to get, the airline said anyone who is owed RM2,000 will get RM10 as “profit-sharing” on the anniversary of the approval of this exercise, adding that they will get similar returns for four years after that based on a specified formula outlined.
In the details of the creditors contained in the statement, AAX owes about RM600 million to passengers and travel agents, thus it will have to pay RM2.9 million as settlement if approved.
According to the proposal sent via email, it has classified creditors into three categories, and they will vote in a fully virtual court-convened meeting conducted by an individual appointed by the High Court on the proposal. Creditors appointing proxies must send in the notice at least 48 hours before the meeting.
It said Class A creditors are those which have security over the assets of AAX, Class B includes passengers and travel agents among others, and Class C is the Airbus Group.
“A failure to implement the restructuring exercise will likely result in an insolvency of AAX and it is expected to be placed in liquidation. Under an assumed liquidation scenario of AAX, the estimated recovery for the creditors of AAX is nil,” it warned in the 110-page document.
“To avoid a liquidation and to allow the airline to fly again, the only option is for AAX to undertake the exercise, raise funds and update its model to survive and thrive in the long term.”
The carrier said that the right-sizing of AAX’s level of operations and its financial obligations as well as the revised business plan will provide new opportunities to transform and reset its business.
“It will emerge in a stronger financial position capable of attracting new equity and debt investments that are critical to the long-term viability of the group,” it said.
In view of the downturn in its financial conditions, AAX Group undertook a downsizing exercise in 2019 which saw the number of employees in the group being reduced gradually from approximately 2,364 as at Dec 31, 2019 to approximately 948 personnel now.
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AAX noted that for the 18-month period until June 30 this year, it had made a provision of RM23.8 billion to settle its debt with creditors where AAX is in default, adding that the contractual liabilities for which the provision was made will be waived upon the successful completion of the restructuring exercise.