Realignment plan key to AirAsia's viability, says aviation expert

The realignment plan to be finalised by AirAsia X Bhd and Capital A Bhd, the parent company of AirAsia, to deal with its Practice Note 17 (PN17) status, will likely emerge as the main factor in determining the viability of their flight operations, an aviation expert says. 

Germal Singh Khera, a former development director at the Malaysian Aviation Commission (Mavcom), said the reorganisation plan to be sent to Bursa Malaysia Securities would provide some idea of the companies' financial resilience. 

He said such factors are normally taken into account by Mavcom before a final decision is made on the renewal of air service licences (ASLs), which airlines need to operate in the country. 

AirAsia X's ASL was renewed for 12 months on Sept 8 last year, effective Oct 1, 2022 to Sept 30, 2023. 

AirAsia's ASL was also renewed, for a shorter period of six months until March 31 this year. 

"Mavcom will only extend AirAsia's ASL for an additional six months from April 1, 2023 to September 2023 if AirAsia complies with specific conditions by Mavcom by Dec 31, 2022," Mavcom had said on its official website. 

MalaysiaNow is attempting to obtain Mavcom's latest statement on the matter. 

AirAsia X was classified as PN17 on Nov 1, 2021, while Capital A, previously known as AirAsia Group Bhd, was classified in that category on Jan 13, 2022.

AirAsia X was given until April 28, 2023 to submit a realignment plan to Bursa Malaysia Securities while Capital A was given until July 7, 2023. 

Germal said airlines usually send ASL renewal applications to Mavcom so that they can continue with their flight operations. 

"The renewal of the ASL will depend on the feasibility of the reorganisation plan," he added. 

"After that, Mavom will make an assessment. If the plan is rejected, it's likely that Mavcom will reject the ASL application." 

If, on the other hand, the reorganisation plans submitted by Capital A and AirAsia X are accepted, Mavcom would view it as a positive development, he said. 

"If the realignment plan looks like it cannot help with the PN17 status, this could influence Mavcom's decision," he added. 

The commission normally takes an average of 45 to 60 days to make a decision. 

AirAsia X shares rose on March 22 to close at RM1.47 per share, recording an increase of 12 sen or 8.89% compared to RM1.35 at closing the day before.

Last Friday, AirAsia X's share price surged to its highest level in a year, rising 27 sen or 19.15% to close at RM1.68 and triggering an unusual market activity query from Bursa Malaysia.

However, shares fell 13 sen or 8.78% to close at RM1.35 on Monday.

Meanwhile, Capital A's share price closed at 77.5 sen on March 22, with no change from the previous day's close.