Friday 29 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on November 22, 2021 - November 28, 2021

AIRASIA X Bhd (AAX) customers will get 1:1 travel credits for tickets bought, its deputy chairman Datuk Lim Kian Onn has clarified.

Many have spoken up, saying that the restructuring plan is unfair as tickets — amounting to nearly RM600 million — sold to passengers and travel agents have been categorised as liabilities and they would only be receiving 0.5% or RM3 million in cash based on the creditors’ proposal that has been passed.

Lim affirms that customers are “very important” to the group. “They get full travel credits without a time bar plus a share of profits for three years and a small payment. If the airline had gone into liquidation, these passengers lose everything. It’s binary.”

Last Thursday, AAX launched bi-weekly flights to Sydney from Kuala Lumpur, and it is an avenue for customers to redeem their full credits.

On Nov 12, the Malaysian Aviation Commission (Mavcom) issued a statement urging AAX to reimburse the customers whose flights had been cancelled, in response to the airline’s treating its customers as creditors and repaying only 0.5 sen for every ringgit paid.

Mavcom said it would not hesitate to exercise its powers under the Malaysian Aviation Commission Act 2015 (Act 711) if AAX fails to reimburse the affected consumers accordingly.

But Mavcom’s statement only came after AAX’s debt restructuring received support from 99% of the creditors during the creditors’ meeting held on Nov 12. Is it a little too late?

Does Mavcom have plans to impose stricter rules and regulations on the reimbursement of airline tickets so that consumers will be better protected going forward? Mavcom did not reply to questions sent by The Edge on this matter.

When asked if AAX is in communication with Mavcom with regard to the reimbursement, Lim says they have been in touch regularly and AAX will continue to engage Mavcom.

“It’s very important that the regulators are happy with us,” he adds. “We will try to keep everyone happy. Let’s look at the bigger picture. Of the RM64 billion debt, 97% belongs to foreign creditors. They took the major hit so that the airline can survive and contribute to the local economy.”

“We are a big contributor to the Malaysian economy and, based on independent estimates, the multiplier effect on the economy was RM78 billion in 2019 alone. We are a major employer of some 2,000 Malaysians. Between 2015 and 2020, we paid local suppliers a total of over RM5.3 billion for goods and services rendered,” Lim says.

“Unlike most other national carriers worldwide, we do not get financial support. We have done well by surviving the last two years. We are now in a position to honour in full those travel credits when we get to fly again and give the affected passengers a share of our profits for three years. It’s a good outcome for all, considering the circumstances,”

“We do, however, deeply regret the distress we have caused. And we will make up for it,” he adds.

Impact on bottom line

The tickets that AAX sold but have not been utilised amount to nearly RM600 million, not a small sum. How would that impact AAX’s turnaround plan as the airline needs to honour the tickets and those seats will not earn income?

“Neither are our seats 100% filled all the time,” answers Lim. “There will be enough flights for passengers to choose from. There is no time bar for redemption of the credits. We have had plenty of zero-fare seats to offer in our promotions in the past. It’s the same concept and there is no financial statement impact.”

Would AAX impose terms and conditions when the passengers use their travel credits to purchase air tickets? Lim says, “We don’t intend to. We have written to each of the 280,000 passengers explaining how they will be compensated. Let us deal with them and try to keep everyone happy. We want to. They are very important to us.”

An aviation analyst says the RM600 million worth of tickets sold but not utilised will be an “opportunity lost” to the airline, in a sense, but it would be fair treatment for passengers. “It is understood that the credits do not expire. AAX will still sell tickets to people who want to fly … there will still be income coming in but instead of earning say RM2 million from carrying passengers for a trip, they may earn RM1 million, given that they will have to honour the pre-sold tickets. This is an opportunity lost, but it will not affect the bottom line per se, other than fuel cost, which could be partly mitigated by ancillary income. In that respect, it’s not going to be a big issue on profitability, just that they probably won’t earn as much for now,” he says.

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