According to documents sighted by Reuters, AirAsia X (AAX) intends to pay only 0.5% to each creditor and terminate all existing contracts to enable it to restructure its liabilities of RM33.65 billion.
This is further supported by their filing to Bursa Malaysia on 18 October, where the low-cost long-haul carrier of AirAsia Group will be holding a meeting with creditors on 12 November to vote on its proposed debt restructuring plan.
"To avoid liquidity and allow the airlines to fly again, the only option for AirAsia X is to implement a debt restructuring proposal," AirAsia said in a 127-page document seen by Reuters, as reported by The Star.
The document sent to its creditors showed half of the total liabilities were the cost of canceling aircraft bookings from its largest creditor, Airbus SE, involving 78 A330neo large aircraft and 30 small-sized A321neo aircraft.
AirAsia X also suggested that if it earns more than RM300 million in annual income before interest, tax, depreciation, amortization, lease rentals and restructuring cost for the financial years between 2023 to 2026, all creditors except Airbus will be entitled to 20% of that income.
Also according to the document, 0.5% of the debt will be paid to each creditor from the operating cash flow for a year after the debt restructuring measures are implemented.
It's also been said that AirAsia is negotiating with 29 lessors of its aircraft and several other creditors on commercial terms to continue the business relationship in the future.
"This gives the lessors the option to continue leasing the aircraft from AirAsia X on new terms or accept the termination of the lease and return the relevant aircraft."
"Two lessors have stated that they want to terminate this lease," the airline said.
The scheme aims to achieve sustainable debt and business restructuring and strengthen the group's financial position. AirAsia X requires consent from creditors who hold at least 75% of the total debt value to obtain consent for its proposal.
The airline also plans to raise RM500 million after implementing debt restructuring measures through rights issues and share subscriptions.
Air Asia is one of the few airlines in the Asia Pacific region that is in the process of debt restructuring to enable it to survive this pandemic. Other airlines looking into debt management and restructuring include Malaysia Airlines, Virgin Australia, Thai Airways, and Philippine Airlines.