AirAsia, too big a dream - delist, scale down, reset and return to basics

KUALA LUMPUR Jan 17 - In 2001, a little known Tune Air Sdn Bhd bought a struggling AirAsia from DRB-HICOM Bhd for RM1 plus all the RM40 million debt.

Few expected to see the company to soar, but soared it did like an eagle to become the world's largest low cost carrier.

However, exactly 20 years later, nobody would have predicted that a tiny invisible virus could bring down the behemoth to become a Practice Note 17 company.

Last Friday, Bursa Malaysia had rejected AirAsia's appeal to give it more time to get its financials in order.

As a result, the company is now a PN 17, a classification accorded by the stock market regulator for financially distressed company.

So what does the future has in store for AirAsia? What will the company do next to survive?

Unless it can find a white knight to rescue it, analysts said these are probably the next few steps which AirAsia will take to stay afloat.

Delist from Bursa Malaysia?

Analysts said the first thing that AirAsia should do right now is to delist its shares from Bursa Malaysia.

This is probably the best and the right thing to do to spare its shareholders and investors from any further financial bleeding.

The company should return all the investments and money back to its owners and its investors to the best of its ability.

By being delisted, it will "free" the carrier from being dragged by the cumbersome procedures it needs to go through as a listed company such as  holding annual general meetings and getting regulatory and investors' approval before it can embark on any decision.

Being delisted is the best option right now where it gets to return the shareholders' money before it gets drained further by the pandemic.

Set up a SPV, sell the planes and restructure loans

Analysts said AirAsia is an ambitious company and may have overleveraged itself.

Nothing wrong with that except that was before the pandemic.

"AirAsia has no choice but to sell its planes and restructure and rationalise its routes. No doubt it will suffer great financial losses when it sells its planes at a great discount.

''But I'm sure its co-founder Tan Sri Tony Fernandes can strike up a dream with its plane supplier Airbus," a fund manager at a government-linked investment firm told DagangNews.com.

The creditors should set up a special purpose vehicle and work out an arrangement with AirAsia on how to restructure its massive loans worth billions of ringgit.

Give out the owners' shares, buy all the existing shares, restructure the debts and sell unproductive assets.

Analysts agree that AirAsia has stretched itself too thin and unable to chew more than its bite. No doubt it was expanding way too fast to set up its units such as AirAsia Indonesia and Vietnam.

"To be fair, nobody saw the pandemic coming and AirAsia with it's more than 300 aircrafts bore the brunt of the virus.

Professor Dr Mohd Harridon Mohamed Suffian of Universiti Kuala Lumpur’s Malaysian Institute of Aviation Technology said AirAsia had fallen into the Practice Note 17 category and this is substantial enough to warrant a regularization plan of the company.

"AirAsia should focus on the prospect of gaining a positive cash flow as part of its regularization plan. They should also take a deep look on their resources and lay out an optimization plan to strengthen their resources and to ensure these resources are adequate and sufficient.

Harridon said restructuring current debts is part of the regularization plan and its imperative and vital that the debt restructuring is viable and could be implemented till the end.

"Air Asia perhaps has to alter their business plan to achieve high viability of profit and to remain competitive in the aviation world. In fact, they should take a discreet look at their position in the aviation market," Harridon told DagangNews.com.

Scale down, return to basics

AirAsia should remember the first few years when it launched the budget carrier concept.

Everybody was so excited to fly in tandem with its now famous slogan "Now everyone can fly."

AirAsia should scale down, reset, go back to basics and build up again.

Remember the days when the carrier offered seats either free or at dirt cheap prices? We hardly see those promotions anymore.

AirAsia must relive the days when Everyone Can Fly. Otherwise, it will be too late and Nobody Can Fly. - DagangNews.com