KUALA LUMPUR (Reuters) – Malaysia’s AirAsia X Bhd

, the long-haul arm of AirAsia Group Bhd

, said it wanted to restructure $15.3 billion of debt and slash its share capital by 90% to continue as a going concern.

Hard hit by the coronavirus pandemic as closed borders have grounded most of its planes, the budget airline said it had severe liquidity constraints and, with no return to normalcy in sight, added, “Imminent default of contractual commitments will precipitate a potential liquidation.”

Its statement late on Tuesday came just days after Malaysia Airlines, the other major carrier, said it was very low on cash and had reached out to lessors, creditors and suppliers for urgent restructuring.

AirAsia X is seeking to reconstitute 63.5 billion ringgit ($15.3 billion) of debt into a principal amount of 200 million ringgit and waiver of the rest.

That debt restructuring as well as a revamp of its business model would be needed to raise fresh equity and debt, which in turn would be required to restart the airline, it said.

The statement did not break down the liabilities or name the airline’s creditors.

AirAsia X declined to respond to a Reuters’ query regarding its debt.

The hefty debt could include aircraft orders, potentially spelling cancellations, said an aviation analyst who declined to be identified as he no longer covers the company.

“A lot of that may be aircraft orders,” he said. “The real haircut may not be that huge if it’s purely on actual debt and lease commitments.”

AirAsia X finalised orders with Airbus SE

for 78 A330neo and 30 A321XLR planes last year, but said in February it would defer delivery of the A330neo planes and consider other changes to trim its fleet.

The airline is Airbus’ biggest customer for the A330neo.

It also

AirAsia Aircraft at Kuala Lumpur Airport Ahead of Earnings

Photographer: Samsul Said/Bloomberg

AirAsia X Bhd.’s restructuring plan was met with bleak forecasts and ratings from analysts as well as a 10% drop in its share price, underscoring the daunting challenges that lie ahead for the grounded carrier.

Public Investment Bank Bhd. maintained its underperform rating and 1 sen price target on the airline, the long-haul arm of AirAsia Group Bhd. Max Koh, an analyst at KAF Equities Sdn Bhd., kept his sell rating and 0.02 sen target, saying he was neutral on the restructuring proposals “given the grim outlook.” AirAsia X’s shares headed for their biggest loss since Aug. 3.

AirAsia, AirAsia X underperforming a gauge of Asia-Pacific airline stocks

The airline said Tuesday the plan, which it expects to complete by the end of next quarter, would wipe out almost 63.5 billion ringgit ($15.3 billion) in debt and save it from collapse as the coronavirus pandemic continues to wreak havoc on travel. The proposal requires approval from investors and creditors. Advance ticket payments will be converted into travel credits for customers.

AirAsia X said it hopes to begin operating with two aircraft in selected markets in the first quarter next year and gradually resume flights to all destinations by the end of 2021. The carrier said it would focus on flights within the five- to six-hour range and defer investment in new or immature routes.

Here’s what some analysts said about AirAsia X’s restructuring plan:

KAF’s Koh (Sell; target 0.02 sen)

  • This is a “hard reset” for AirAsia X to remain a going concern
  • Neutral on plans to operate with a leaner and lower cost structure and 500-million ringgit fundraising exercise as the airline will need approvals from creditors and shareholders to succeed
  • The aviation industry’s outlook is grim due to the Covid-19 pandemic
  • Fresh equity injection from shareholders should accompany AirAsia X