AirAsia X targets up to $600m debt overhaul as group consolidates airlines

Malaysia’s AirAsia X is targeting between $500 million and $600 million in debt restructuring after acquiring the short-haul aviation business of Capital A, its deputy group CEO said, as the budget airline group completes a years-long consolidation triggered by the pandemic.

The airline is also targeting near-term revenue close to $6 billion following the consolidation, its chief financial officer said, according to a Reuters update on Thursday.

AirAsia X, the medium- and long-haul affiliate of the AirAsia brand, will now combine seven airlines under a single banner, creating what executives describe as one unified airline group.

“We are also looking at a lot of refinancing initiatives … to stretch out the tenure, to reduce the interest costs and to collapse all our debt instruments into one or two loan instruments,” Deputy Group CEO Farouk Kamal said in an interview on Wednesday.

One airline platform, clearer focus

Under the completed transaction, all AirAsia-branded airlines – including both short-haul and long-haul operations across Asia – are now housed within AirAsia X, while Capital A pivots away from aviation to focus on its non-airline businesses.

Those businesses include aircraft maintenance, logistics and cargo, digital travel services, food and beverage, and loyalty and brand licensing platforms.

Capital A CEO Tony Fernandes described the completion of the aviation disposal as the end of the most difficult chapter in the group’s history, calling it one of the most complex airline restructurings undertaken since global travel ground to a halt during the pandemic.

The consolidation involved the issuance of more than 2.3 billion new AirAsia X shares to Capital A and its shareholders, alongside AirAsia X assuming around $936 million in debt previously owed by Capital A to AirAsia’s airline units. AirAsia X also raised fresh capital through a private share placement to investors.

Capital A remains a minority shareholder in the newly consolidated airline group and is seeking to exit its financially distressed status under Malaysia’s stock exchange rules.

Expansion plans: London and the Middle East

With the consolidation complete, AirAsia X is refocusing on growth.

The airline plans to resume flights to London as early as the middle of this year, more than a decade after it last served the British capital, Farouk said. It previously operated services to Gatwick and Stansted airports.

The carrier also launched flights to Istanbul in November and is developing a hub in Bahrain to improve connections between Asia, the Middle East, Europe and Africa, positioning the region as a key part of its international expansion strategy.

To support that expansion, AirAsia X expects delivery of four long-range Airbus A321LR aircraft this year, which allow narrow-body jets to operate longer routes more efficiently.

The group operates a combined fleet of about 255 aircraft and has ordered 50 longer-range A321XLR jets, while retaining the option to convert additional aircraft already on order. Executives said the airline is also in discussions with manufacturers as it considers further fleet expansion.

Leadership changes and next phase

Following the completion of the acquisition, AirAsia X has approved a new management structure aimed at strengthening governance and execution as the group enters its next phase of growth.

Bo Lingam has been appointed group chief executive officer, responsible for overall strategy, while Farouk Kamal becomes deputy group CEO overseeing corporate functions and operations. Low Kar Chuan has been appointed chief financial officer, with responsibility for financial management and capital discipline.

The airline said the changes are intended to support tighter financial controls and operational decision-making following the consolidation of its short-haul and long-haul businesses under a single listed entity.

“With both our short-haul and long-haul capabilities now under a single unified structure, we can drive greater efficiency, strengthen our network and deliver a more seamless travel experience,” Lingam said in a statement.

Financial reset after pandemic disruption

Following consolidation, AirAsia X is targeting near-term revenue approaching $6 billion, alongside an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of around 20 per cent and passenger load factors above 80 per cent, its chief financial officer said.

Low said the airline aims to repay bank loans taken during the COVID-19 period within two to three years, as demand normalises and the group benefits from a simplified corporate structure.

AirAsia X said the consolidation allows it to focus on expanding flight operations and managing costs, while Capital A pivots towards its non-airline businesses.

Capital A was classified as financially distressed by Malaysia’s stock exchange after the pandemic severely hit air travel, and has said the aviation disposal is central to efforts to restore its financial position.

Brand and corporate structure under review

AirAsia X also confirmed it has completed the listing of more than 2.9 billion newly issued shares linked to the transaction and private placement, formally concluding the airline consolidation.

The company said it is evaluating a possible change of name to reflect the unification of the group’s aviation business, with any proposal subject to regulatory approvals and further announcements.

Executives said the combined airline platform is expected to provide a more resilient operating base as the group looks to expand its network beyond Asia and rebuild after years of disruption.

-With Reuters