Malaysia’s AirAsia X labelled a distressed firm

AirAsia X (D7, Kuala Lumpur Int’l) risks being delisted from the Malaysian stock exchange after being categorized as a financially distressed Practice Note 17 (PN17) entity by its external auditors last week.

In expressing a disclaimer of opinion in the airline’s audited financial statements for the 18-month period ended June 30, 2021, Ernst & Young said that in their assessment, material uncertainties exist that may cast “significant doubt” on AirAsia Group’s and AirAsia X’s ability to continue as a going concern. The Group and its longhaul subsidiary reported a net loss of MYR33.72 billion ringgit (USD8.15 billion) and MYR33.79 billion (USD8.16 billion) respectively for the period through June 30, 2021, with current liabilities exceeding current assets by MYR34.21 billion (USD8.27 billion) and MYR34.30 billion (USD8.29 billion) respectively.

“As a result of the pandemic, the Group and the Company have grounded most of the fleet since March 2020 and have deferred payment to creditors,” the accounting firm said. “Consequently, the Group and the Company have triggered events of default for various contracts and have made a provision for termination claims of MYR25.16 billion (USD6.08 billion), which is an integral part of the total provisional scheme amounts owing to scheme creditors of MYR33.65 billion (USD8.13 billion).”

However, in a disclosure to the Bursa Malaysia on October 29, AirAsia X said it is now “taking the necessary steps to address its PN17 (Practice Note 17) status,” adding that it has one year to regularize its financial condition, failing which it will be delisted from the stock exchange.

AirAsia X will convene a meeting of creditors on November 12 to vote on a proposed restructuring plan for its MYR33.65 billion (USD8.07 billion) worth of liabilities. As previously reported, the long-haul low-cost carrier is offering to pay only 0.5% of the debt owed to each of its creditors and will terminate all existing contracts before an eventual resumption of operations. If accepted, only then can the airline proceed with the implementation of its corporate restructuring programme and fundraising drive.