PETALING JAYA: One of Malaysia’s airlines could potentially shutter by year-end, as the balance sheets of both AirAsia Group Bhd and Malaysia Airlines Bhd are stretched and require cash injections, said Malaysian Aviation Commission director of aviation development Germal Singh.
According to a Bloomberg report, Germal noted that the government is unlikely to intervene to help out, and Malaysia Airlines shareholder Khazanah Nasional Bhd will have to make a critical decision whether to intervene and inject funds.
Germal was speaking at a virtual webinar hosted by OAG Aviation Worldwide yesterday.
Malaysia Airlines is embarking on an urgent restructuring of its business and capital structure, of which one move entailed a request for steep discounts on aircraft rentals from its lessors.
The carrier, in a letter to lessors early this month, revealed that it was experiencing an average monthly operating cash burn of US$84mil but only had US$88mil in liquidity as of Aug 31 and an additional US$139mil available from Khazanah, its sole shareholder.
Malaysia Airlines added that it is unlikely to be able to make payments owed after November, unless it receives more funding from Khazanah.
Germal said the cost base of budget airlines has changed significantly to what they were 20 years ago.
“Low-cost carriers have become more mainstream, flying more popular routes and landing and departing from major airports. Their costs are totally different now, ” he said.
AirAsia X (AAX), the long-haul arm of AirAsia, has also proposed a major restructuring plan, in the form of debt and corporate restructuring. AAX has RM10.3bil in total liabilities on its balance sheet, exceeding total assets of RM9.36bil.
Under the debt restructuring, the group has proposed that RM63.5bil of debts owed to unsecured creditors be reconstituted into an acknowledgement of indebtedness by AAX for a principal amount of up to RM200mil.
Meanwhile, the corporate restructuring will entail two components, namely, share capital reduction as well as share consolidation.
AAX plans to reduce its share capital by 90% from RM1.53bil to RM150mil, representing a reduction of RM1.38bil, which will be used to offset the accumulated losses.
In addition, AAX has proposed to consolidate every 10 existing ordinary shares to one AAX share.
As for Malaysia Airports Holdings Bhd (MAHB), which manages 39 airports across the nation, Germal highlighted that the group has not undertaken any restructuring yet but will “definitely be impacted”.
MAHB said its network of airports recorded 3.3 million passenger movements in August, down 74.4% from a year ago, but up 28.4% from the previous month. It said while the domestic sector saw 2.8 million passenger movements, the international sector remained subdued with over 500,000 passengers.
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