Airbus and AirAsia X, a match made in heaven?
The two questions we wanted to ask the Airbus CEO during the plane maker’s 2021 annual results briefing Q&A on 18 February were simple ones.
If AirAsia X, Malaysia’s low-cost, long-haul airline cannot be revived, would it spell the end of Airbus’ A330neo programme? And did he agree with Tony Fernandes that the AirAsia Group and Airbus “love each other” and that they were both “joined at the hip”?
Ensconced comfortably in his seat in Toulouse, Guillaume Faury could not say yes or no.
In fact, he never had a chance to address the query because the moderator – more likely his minders – rejected our request to probe him. Twice.
It is entirely the prerogative of Airbus to select who it felt should have the privilege of interrogating its CEO.
However, for a company that has invested over USD400 million in Malaysia and more across Asia Pacific – supposedly its “core market” accounting for over a third of total orders to date – it was odd there was not a single, specific question (out of nearly 20) on the region during the session.
Why bother inviting people from Asia if you did not want to hear from them?
The following are just some of Airbus’ customers in Asia Pacific.
AirAsia Group is Airbus’ biggest customer for the A320 family. The airline has ordered over 660 in the past 15 years. AirAsia X currently operates 36 A330-300ceos and has ordered 78 A330-300neos, 10 A350-900s and 30 A321XLRs.
India’s IndiGo has a firm order for 300 A320neos and took delivery of 44 of the aircraft in 2020 alone. If the A321 and A321XLR are included, the carrier will have a total of about 730 Airbus jets.
Indonesia’s Lion Group runs a fleet of 44 A320s under its Batik Air badge with 190 orders still unfilled. On 18 March 2013 Lion placed an order for 234 A320 aircraft. Its Thai Lion Air unit flies the region’s first A330-900 while six A330-300ceos are with the mainline carrier.
In Vietnam, VietJet has 73 A320 family of jets in service, with 20 A321XLR on order (including five to be converted from the A321neo variant). And VietJet has a training facility agreement with Airbus comprising two A320 simulators.
You get the drift.
The Q&A lasted for about an hour following updates by Faury and Dominik Asam, Airbus’ CFO.
There was just the one token question on Asia, specifically on China (which is not reflective of the region) and a different beast (this year, an Ox) altogether.
Somebody asked if the emergence of China’s C919 plane posed a threat to the duopoly of Airbus and Boeing.
Faury is an engineer by training and so by definition, dedicated to precision. As chief of a European company with a huge Final Assembly Line in Tianjin, in the world’s largest and most important market, he is also the consummate diplomat.
He commented: “It’s too early to say to what degree Comac (the maker of the C919) will be able to compete with Boeing and Airbus,” and added, for good measure, “but we are taking them seriously and we are watching carefully what’s happening there.”
A technically accurate reply, most definitely. Woefully inadequate, too.
The reporter had asked a question that Faury knew could only be incited with a politically correct answer.
Indeed, the whole proceeding was a strain, like watching one of those Euro-centric movies that does not make sense, because it is not supposed to make sense.
The X-rated carrier
As the coronavirus continues to create mayhem, the pained speculation, the postulation and guess-work begin as we try to figure out and understand how Airbus plans to restore health to its acutely ill twin brother.
We know the opinion of one leasing company that is owed money by the cash-strapped airline, describing the carrier as “hopelessly insolvent.”
Should an impecunious airline with debts and liabilities of close to USD16 billion and barely making ends meet since its IPO in 2013 be saved?
To put things into perspective, AirAsia X was listed on the Kuala Lumpur bourse at an offer price of MYR1.25. At the close of market on 23 February 2021 a share was worth 10 Malaysian sen or about 2.45 US cents.
Assuming the debt restructuring goes ahead AirAsia X’s equity value will still be under water.
But what was most astonishing, almost unreal, was the airline saying it hoped to reconstitute its debts of USD16 billion into a principal amount of MYR200 million (USD49 million) and offering lessors a horrifying haircut of 98%.
That means for each dollar owed, you get 2 cents back.
The picture presented in the media is of an airline crippled by Covid, its All-Stars (as AirAsia’s staff are affectionately called by its co-founder) going down gallantly, even if unavailingly, against the diabolical disease.
The real story is more complex, but of great interest.
It is the story of a bad mistake, of greed, which has left both airline and Airbus worse off in terms of finances and reputation than it need have been.
It has gone unacknowledged, as many airline errors tend to do, and has been almost buried under the powerful emotions stirred by a dreadful virus and the inevitable clash between fact and fiction.
Did Airbus seriously believe, in spite of generous discounts, that AirAsia X could manage an order of close to 100 widebody jets worth in excess of USD5 billion given its already weak balance sheet then?
Today the discount carrier holds almost a quarter of the A330neo order book.
Airbus has little choice now but to go along with Fernandes’ bravado, that publicly they both adore one another and as the flamboyant showman deftly puts it, “joined at the hip” much like Siamese twins.
The AirAsia boss is crafty and famous for being outspoken. Born Malaysian Indian he nevertheless possesses the Irish gift of the gab, leading many to read his recent remarks on Airbus as a double entendre.
Neither manufacturer nor lessors exposed to AirAsia X have the stomach to see the carrier, no matter how flawed its business model is or how unlikely it is to succeed, go bust.
The pressing priority, for Airbus, is to ensure the continuation of its A330neo programme, which will be in tatters if AirAsia X fails.
It is at risk of losing as much as USD12 billion if pre-delivery payments and future debt calculations for aircraft purchases are taken into account.
For the lessors, recovering some of the debts owed to them – even with hideously high haircuts – are preferable than being left with nothing.
Many among us believe the aviation industry has no doubt changed as a result of Covid-19, but the problem lies in believing it has changed for the better.