AirAsia X (AAX) is seeking a relief from Bursa Malaysia Securities Berhad to exempt the airline from the requirement to submit a Proposed Regularisation. The airline is also seeking the lifting of its Practice Note 17 (PN17) classification.
What is PN17?
PN17 is a status given to companies listed on Bursa Malaysia Securities Berhad (Bursa Malaysia) that are in financial distress. AirAsia X Berhad (AAX) was placed under PN17 status on 30 July 2020 due to its declining financial performance.
Some of the criteria that a company must meet to be classified as PN17 include:
- Shareholders’ equity is less than 25% of its total paid-up capital.
- The company has been unable to prepare its financial statements on a timely basis.
- The company has been unable to pay its debts as they fall due.
- The company has been unable to comply with the listing requirements of Bursa Malaysia.
Once a company is placed under PN17 status, it is required to submit a regularisation plan to Bursa Malaysia within six months. The regularisation plan must outline how the company intends to address its financial problems and return to profitability.
AAX has submitted a regularisation plan to Bursa Malaysia, which includes a debt restructuring scheme, a share capital reduction, and a revision of its business plan. The company has also been able to improve its operating and financial performance in recent quarters.
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Restructuring for resilience
Since triggering suspended criteria under PN17 in July 2020, AAX embarked on a comprehensive series of measures and corporate exercises to improve its financial standing.
The restructuring process was multifaceted, involving a debt restructuring scheme, a substantial share capital reduction of 99.9%, share consolidation, and a thorough revision of its business plan.
One of the key elements of AAX’s revised business plan was the adoption of a leaner and more sustainable cost structure.
The airline shifted its primary focus to medium-haul flight operations while terminating unprofitable routes.
Simultaneously, it recalibrated its attention to routes with proven loads and yield performance in its core markets, ensuring a strategic approach to route planning.
Aligning Fleet and Operations
During this period, AAX made a prudent decision to defer all investments in new and untested routes. The company also underwent a restructuring of contracts and arrangements relating to its fleet and overall operations, aligning them with its future needs and size.
As part of the right-sizing strategy, AAX planned for manpower consolidation and optimization to ensure its workforce was tailored precisely to its operational requirements.
Thanks to its dedicated efforts and strategic decisions, AAX managed to turn its financial position around significantly.
After enduring 12 consecutive quarters of losses from June 2019 to April 2022, the airline finally achieved three consecutive quarters of net profit, marking a remarkable turnaround.
As of March 2023, AAX also reported a positive shareholders’ equity, signifying a promising upward trajectory.
Meeting the Criteria for PN17
With its improved operating and financial performance, AAX successfully met the criteria prescribed under Paragraph 2.1 of PN17.
Of particular significance was the attainment of positive shareholders’ equity, a milestone that contributed to the company no longer triggering any of the PN17 criterias.
The external auditors expressed a clean opinion on AAX’s financial position, further strengthening its standing.
Words from the AirAsia X CEO
Benyamin Ismail, the CEO of AAX, expressed his satisfaction with the positive developments. He credited the restructuring exercises undertaken in recent years for the airline’s transformation and financial stability.
Since resuming operations in April 2022, AAX observed increasing demand across all its core markets, which directly impacted operational and financial performances.
AAX’s steady recovery
The past three quarters have been particularly encouraging for AAX, showcasing passenger load factors of 73%, 79%, and 80% for the periods ending 30 September 2022, 31 December 2022, and 31 March 2023, respectively.
Despite having some of its fleet grounded, AirAsia X maximized revenue recovery across all segments. As of 31 March 2023, the airline reported a healthy cash position of RM192.37 million, free from outstanding debts, and with sufficient working capital for the next 12 months.
Strengthening equity base
To further solidify its equity position, AirAsia X recently completed the placement of approximately 32,258,066 new AAX Shares to AHAM Asset Management Berhad, AIIMAN Asset Management Sdn Bhd, and Lavin Group Sdn Bhd at an issue price of RM1.55 per AAX Share.
This move raised net proceeds of around RM50.00 million, demonstrating growing confidence in AAX and its future prospects.
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