AirAsia X sets rights issue, revamps management in turnaround bid
By Trinna Leong and Siva Govindasamy
KUALA LUMPUR/SINGAPORE (Reuters) - Struggling Malaysian long-haul budget carrier AirAsia X announced a $109 million equity rights issue to shore up its weak financing and reshuffled top management in a bid to turn around its fortunes.
AirAsia X, an affiliate of Asia’s largest budget carrier group AirAsia , said on Friday Chief Executive Officer Azran Osman Rani has resigned with immediate effect and Benyamin Ismail has been appointed acting chief executive.
It also said AirAsia's co-founder Kamarudin Meranun has been appointed to the new role of group chief executive. Reuters had reported the rights issue plan and the departure of the CEO earlier in the week.
The airline did not give a reason for the management revamp. The changes, though, mean that AirAsia and investors in AirAsia X will have a bigger involvement in the day-to-day management of the company.
"Increasingly, there was a growing perception that the airline needed some fresh ideas. They needed to find fresh ways to cut costs and increase revenues. That is behind the management change,” said a person close to AirAsia X, who did not want to be identified due to the sensitivity of the matter.
AirAsia X, which operates Airbus A330s mainly on routes to Australia, China and Japan, posted a net loss of 210.9 million ringgit for the three months to Sept.30, 2014, its worst ever quarterly loss since listing in July 2013.
Its shares have dived 48 percent since its IPO in July 2013, while the Malaysian benchmark stock index <.KLSE> has risen 0.7 percent over the same period.
The growth in airline capacity out of Southeast Asia and the depressing impact that has had on yields resulted in 2014 being one of the worst years for airlines in the region, analysts said.
AirAsia X also faced additional challenges after Malaysia Airlines MH370 disappeared in March and MH17 was shot down in July 2014. To keep load factors up amid falling demand, Malaysia Airlines offered steep discounts across the network, affecting the profitability of all Malaysian carriers.
In December, a plane operated by AirAsia's Indonesia affiliate crashed into the Java Sea, killing all 162 people on board.
Some analysts say AirAsia X can return to profitability this year on the back of lower fuel prices. The carrier is due to announce its October-December earnings in mid-Feb.
The 395 million ringgit (72.19 million pounds) proposed rights issue is a crucial step in the airline's recovery attempt.
"The proposed rights issue will enable the company to raise funds for working capital requirements and reduce its short-term borrowings thus resulting in interest savings, both of which are expected to contribute positively to the group in future," AirAsia X said in a local stock exchange filing.
It said the price and entitlement of the rights shares, which will be issued together with free warrants, will be determined later.
(Additional reporting by Anshuman Daga in SINGAPORE and Yantoultra Ngui in KUALA LUMPUR; Editing by Muralikumar Anantharaman)
