February 27, 2020 / 12:12 PM / a month ago

Malaysia's AirAsia X defers A330neo deliveries as virus pressures frail finances

KUALA LUMPUR/SYDNEY (Reuters) - Malaysian long-haul budget airline AirAsia X (AIRX.KL) said it will defer delivery of 78 Airbus SE (AIR.PA) A330neo planes and consider other changes to reduce its fleet, as the coronavirus outbreak adds pressure on the loss-making carrier.

FILE PHOTO: An AirAsia Airbus A320-200 plane is pictured at Kuala Lumpur International Airport in Sepang, Malaysia, July 22, 2019. REUTERS/Lim Huey Teng

AirAsia X said late on Thursday it might sell two A330s that could fetch up to $100 million and return five others to lessors early, adding it was already in negotiations with lessors about a targeted 30% cut in lease rates.

The airline cancelled 600 flights for March, according to an investor presentation published after it reported a higher quarterly net loss. AirAsia X flagged lower forward bookings and pressure on fares in the presentation.

The virus has deepened the challenges facing the airline and sister carrier AirAsia Group Bhd (AIRA.KL), whose Chief Executive Tony Fernandes and Chairman Kamarudin Meranun have both stepped aside for at least two months amid investigations into a corruption scandal. Airbus was alleged to have paid a $50 million bribe for plane orders.

Brendan Sobie, a Singapore-based independent aviation analyst, said AirAsia X was highly exposed to China and other markets in North Asia significantly impacted by the coronavirus but the carrier was also in a weak financial position prior to the crisis.

AirAsia X shares fell by 5% on Friday to a record low after it posted a net loss of 95.8 million ringgit ($22.62 million) in the quarter ended Dec. 31, increasing from an 88.1 million ringgit loss a year ago.

Flights to and from mainland China accounted for about 30% of AirAsia X’s capacity before the outbreak of the virus. It has a fleet of 24 A330 planes.

The carrier last August reached a revised deal with Airbus to take 78 A330neos and 30 long-range A321XLR narrowbodies, down from earlier plans for 100 A330neos. AirAsia X is Airbus’ biggest customer for the A330neo, a more fuel efficient version of the older A330 model.

AirAsia X said delivery of the A330neos would be deferred and it would move toward a dual-fleet strategy with A321s set to replace its A330s on routes of four to six hours when demand recovers.

“We believe advanced aircraft technology has changed business dynamics as we can now fly narrow body aircraft longer,” AirAsia X Malaysia CEO Benyamin Ismail said in a statement.

An AirAsia X spokeswoman said the airline was evaluating market conditions and had yet to confirm the duration of the A330neo delivery deferrals. An Airbus spokesman said the manufacturer does not comment on delivery schedules for individual airlines.

($1 = 4.2350 ringgit)

Reporting by Liz Lee in Kuala Lumpur and Jamie Freed in Sydney; Editing by Jane Wardell and Muralikumar Anantharaman

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