Malaysia’s Air Asia Group restructures its huge Airbus plane order

Thursday, October 7, 2021

Malaysia’s Air Asia Group Bhd (AIRA.KL) said it has reached a deal with Airbus SE (AIR.PA) to restructure an order for 362 narrow body planes worth tens of billions of dollars, including switching 13 A320neos to the larger A321neo model.

Deliveries of the 362 A321neos are now planned through 2035, the cash-strapped airline said on Wednesday, without providing details of the previous timetable.

Industry sources told Reuters last month that Airbus had agreed to reschedule deliveries and improve terms for its largest Asian customer to salvage the valuable contract.

Air Asia received its first A321neo in November 2019 and currently has four in service after halting deliveries during the pandemic. Airbus sold six A321neos that had been built for Air Asia last year, industry sources have said.

Airbus Chief Commercial Officer Christian Scherer said in a statement that the deal was an example of how the plane maker had worked with customers to adapt to the impact of the pandemic.

Other airlines with large plane orders, most of which are in Asia, are also in the midst of restructuring their orders or are expected to press for relief.

It is hard to cancel unless an airline goes the bankruptcy or court-aided restructuring route said Brendan Sobie, an independent aviation analyst.

Planemakers typically put price escalation clauses into contracts that lead to price rises when airlines delay delivery but also have the discretion to waive or not fully enforce the price rises.

Air Asia’s auditors have, for more than a year, raised doubts about its ability to continue as a going concern due to COVID-19’s impact on the travel industry.

Air Asia Group President Bo Lingam said the airline had thoroughly reviewed its network and fleet strategy as it prepares for travel to resume.

Air Asia said this week had received approval from Malaysia’s only financial guarantee issuer for a loan of up to 500 million ringgit ($120 million) with an 80% government guarantee.

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