MAHB checkmates AirAsia X

Back against the wall: MAHB will potentially lose RM254mil in revenue a year, on a proforma basis assuming the hypothetical closure of AAX at the beginning of 2019. — Reuters

THE love-hate relationship between Malaysia Airports Holdings Bhd (MAHB) and AirAsia Group Bhd along with entities linked to the latter is no secret to those who watch the aviation industry closely.

The two, together with AirAsia’s long-haul arm AirAsia X Bhd (AAX), work on a symbiotic relationship, or so it seems.

MAHB has slapped AAX with a RM78.16mil lawsuit, just two weeks after the airline announced a restructuring scheme for RM63bil of its debts, in which it expects creditors to take a 99% haircut.

It is also seeking to intervene in AAX’s restructuring scheme to be classified as secured creditors.

While AAX may have all the plans to carry out its debt and corporate restructuring, the lawsuit is something that will cripple the plans, which will ultimately force AAX to fold.Many might be thinking that MAHB laid the lowdown on AAX, it has to be noted that it is still within its right to make the claim.

The long-haul budget airline may have no choice but to capitulate to move forward with its restructuring scheme.

This process will likely antagonise all the other creditors but as AAX is being held against the wall, it has no choice but to concede because if it does not, the court case could drag on for months, risking AAX’s survivability.

Time is of the essence of its restructuring process and this precious commodity is not at its disposal as it continues burning cash.

Without new money coming in, AAX is as good as dead.

There are two schools of thought as to why MAHB is doing this.

One is so that it has the upper hand in dictating the restructuring plan and asking for better terms.

The second is to deliver the final nail into AAX, killing it.

There may be no incentive for MAHB to do so, but looking at the bigger picture, the demise of AAX will be a win for Malaysia Airlines Bhd because the latter will no longer have a low-cost competitor.

While MAHB and Malaysia Airlines are not related, technically, they are both government-owned.

Khazanah Nasional Bhd is the sole owner of the flag carrier and it holds a 33.21% stake in MAHB.

The Employees Provident Fund owns 14.71% in MAHB while the Retirement Fund Inc and Amanah Saham Nasional Bhd holds 5.07% and 3.69% respectively.

ASNB is the wholly-owned unit trust management company of Permodalan Nasional Bhd.

But is forcing AAX to liquidate the right thing to do?

A note by CGS-CIMB Research estimates that MAHB will potentially lose RM254mil in revenue a year, on a proforma basis assuming the hypothetical closure of AAX at the beginning of 2019.

These comprise passenger service charge (PSC) revenues, landing fees and duty free revenues.

This amounts to 6.4% of MAHB’s Malaysia revenue of RM3.94bil last year.

In terms of profit after tax, MAHB stands to lose RM142mil, or 24% of the Malaysia business’ reported net profit last year of RM589mil.

The research house says AAX ferried six million passengers last year, half of which were departing passengers.

“Isn’t this the proverbial of killing the goose that lays the golden eggs?” an analyst asks.

If AAX collapses, the multiplier-effect to the economy in terms of tourism is gone, not to mention that over 1,000 employees are set to lose their jobs.

Another question raised is if any other airline will be able to pick up the pieces with AAX folding.

“If AAX goes bust, are there any other airlines that are ready to immediately fill up what AAX has done and the capacity that it brought in?

“I don’t think one or the other needs to die. Both AAX and Malaysia Airlines can survive because they operate two different markets, one for budget and the other for premium, ” the analyst adds.

At a time when MAHB and AAX are fighting a common enemy in the form of the coronavirus disease, the market was definitely taken aback when the airports operator served the airline with a legal suit when many think it is imperative for them to navigate the turbulence together.

The RM78.16mil lawsuit is for the outstanding amount for various aeronautical charges including PSCs, passenger service security charges, aerobridge charges, aircraft parking charges, check-in counter charges, landing charges and late payment charges.

In a legal letter by MAHB’s to AAX’s dated Oct 14, MAHB says it is seeking to challenge AAX’s classification of MAHB as an unsecured creditor, saying that it was a “clear indication” that AAX does not intend to fully settle the amounts owing to MAHB but this was not mentioned in MAHB’s filing with Bursa Malaysia on Thursday.

The RM78.16mil lawsuit comes up to only 0.1% of the airline’s debts.

It may be MAHB’s tiny pawn on the board, but it could be the crucial piece that delivers AAX the checkmate.

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