KUALA LUMPUR – AirAsia X Bhd (AAX) said the airline cannot afford to provide its passengers with cash refunds due to insufficient cash flow.
It said it could not treat its customers differently from other creditors, despite the Malaysian Aviation Commission’s (Mavcom) threat of legal action over the budget long-haul carrier’s failure to provide them with cash refunds.
AAX chief executive Benyamin Ismail said that while cash reimbursements were not on the cards, it will not shy away from engaging with Mavcom to address the issue.
He said the airline, which is recovering from the impact of the Covid-19 pandemic, is instead looking to replace their cancelled flights with credits equal to the value of the tickets initially bought.
This came despite an earlier report saying the company was looking to only repay 0.5% of the RM500 million worth of advance ticket payments.
The new scheme also implied that a customer would only receive RM50 for a ticket costing RM1,000, leading to criticism against the airline over consumer rights.
“I don’t think we want to delve too much into it (threat of legal action). That is something that we have to deal with directly with Mavcom. We will entertain them and deal with the issue,” he said in a recent interview with The Vibes.
Benyamin said this in response to questions raised by consumers over a year on the status of their tickets.
Earlier this month, the airline said 99% of its creditors – including aviation giants Airbus – reportedly agreed that the carrier will repay 0.5% of its debt owed and cancel existing contracts under its RM33.65 billion restructuring plan.
AAX made this reassurance to its customers, despite Mavcom’s insistence that travellers should not be treated as creditors who provide products or services to the company.
The commission on November 13 said its decision to issue the threat is in line with its mandate to regulate economic and commercial matters relating to civil aviation in Malaysia, and its commitment to protecting air travel consumer rights.
Despite the looming legal action, Benyamin said the company will work closely with the regulators to address the issues at hand.
“The key thing to note is that when we did this restructuring, all the creditors were seen as those to whom we owe money,” he added, referring to the company’s restructuring plan announced on October 18.
“One of them (creditors) is the passengers. We cannot treat anybody differently. If we are to exclude the passengers, the creditors – who are other companies – will complain and ask why we treat passengers differently.
“In the scheme itself, everyone will be affected by the restructuring, but what we did in the court documents was say that the company is flexible in terms of giving back benefits to the passengers.
“But the scheme speaks for itself. We have to be fair to all creditors. Is it better for the passengers if we can operate again or not? If not, the passengers get nothing, but if we survive, they will get all the credits.”
Flight credits and benefits in lieu of cash
Benyamin said AAX will make good on its resolution to provide flight credits to customers whose flights were cancelled during the Covid-19 pandemic.
“We may provide credit value for what they purchased, so if they bought something for RM1,000 (before), we will give it in credits with flexible terms.”
On Monday, AAX’s parent company, AirAsia Group Bhd, posted RM887 million in losses for the third quarter ending September 30.
Despite monolithic debt obligations amounting to some RM4 billion, AAX has shown optimism in going back into the blue as Malaysia and other flight destinations reopen their borders for international travel.
On top of an increased passenger load expected within the coming year, the carrier is also looking to pivot to cargo transportation services.
However, Benyamin said he believes the reopening of borders and return of frequent international flights may take up to a year from now.
In the meantime, he said the airline will look into ways in which the customers can redeem their credits.
“We will do that over time once the flights have resumed. At the end of the day, the passengers are the bread and butter for this airline. If we were to shortchange them, it would have a big impact on the brand and the airline as well.
Rehiring staff and reinstating wages
When the Covid-19 pandemic struck last year, AAX was forced to retrench some 1,000 staffers, but with a gradual return of operations, the airline has begun rehiring them, albeit in smaller numbers.
Benyamin said the company is looking to rehire more as and when the company requires an increased workforce.
“Certainly. We will rehire them as and when we need them. We are rehiring quite a lot of them already as the flights open up and we are flying,” he said in response to a question about reinstating retrenched workers.
However, he said, it may not be the same workforce seen prior to the pandemic as the company is only operating 15 planes now compared with the 24 planes it had before the pandemic.
“It will be done gradually over time as we activate new planes, so that’s the idea.”
Aside from rehiring, he said the airline will also reinstate the salaries of staffers cut during the pandemic, but only when flights become more frequent.
“We would obviously want to do that as quickly as possible, and put people back to where they were before, if not (give them) more. But that’s when markets reopen, when we start flying and when business comes back.
“We’re not going to be able to extract blood out of stone. If we’re not flying, how are we going to find the money to pay them? It is important that we can fly as quickly as possible to start paying (past salaries).
“It’s a zero-sum game. The money must come from somewhere. It comes from the opportunity in business to fly again.” – The Vibes, November 25, 2021
Tomorrow: Will AAX be delisted or taken private?
Additional reporting by Anne Edwards
