Daily Management Review

AirAsia X's Proposed Restructuring Would Result In Loss Of $5 Billion In Orders For Airbus


AirAsia X's Proposed Restructuring Would Result In Loss Of $5 Billion In Orders For Airbus
If the planned debt restructuring scheme of AirAsia X Bhd (AAX) foes through, the European plane maker Airbus SE will stand to lose more than $5 billion worth of aircraft orders, the company said.
Airbus has joined a dozen creditors who have come together to challenge the restructuring plan of the Malaysian low-budget carrier, showed court documents.
AAX’s key lessor BOC Aviation Limited's (BOCA) had alleged that the debt restructuring plan of the airline was in favour of Airbus and did not have a debt-to-equity swap offer for creditors, which had been opposed by the airline. 
There was a strong possibility Airbus "will suffer substantial losses and prejudice" from termination of purchase agreements, said Asia-Pacific Head of Region Anand Emmanuel Stanley, in a December 16 affidavit filed at Kuala Lumpur High Court.
"AAX has ordered and Airbus has already built, or substantially built, seven A330neo aircraft which are currently in the inventory," he said and added that Airbus's profitability will be impacted if there is cancellation of another 71planes that are on order.
48.71 billion ringgit ($12 billion)is owned by AAX to Airbus against predelivery payments for committed purchase of 118 aircraft, the airline had said in a a December 17 affidavit.
Future debts, which are primarily owed to Airbus, should not be included in the debt calculations of AAX, BOCA has said. About 75 per cent of the total debt value needed to approve the restructuring of AAX belongs to Airbus which means that lessors have relatively little say in the matter. 
While denying that the calculations were unfair, AAX Senior Legal Counsel Shereen Ee said that the calculations also consider termination compensation for BOCA until the end of its lease period.
It "would run counter to the objective of restructuring AAX to ensure it can raise fresh funds to continue as a going concern", Ee said with respect to BOCA's proposed debt-to-equity conversion.
An equity stake in AAX can be taken up by any party against an investment of fresh funds in the airline, she said.
After lessors agreed to convert debt to equity, BOCA became one of Norwegian Air's top shareholders in May.
Last month, sate support was denied to the airline and it was forced to seek bankruptcy protection. It secured shareholders' vote last week for its rescue plan.
According to AAX's lawsuit, BOCA is the airline’s largest lessor.
A company spokeswoman said that the airline would continue engaging with all creditors. "We are working with all stakeholders to expedite the completion of this recapitalisation so that we can start flying again," she said.