KUALA LUMPUR (Oct 19): Medium-haul low-cost carrier AirAsia X Bhd (AAX) suffered a setback on Thursday in its attempt to get itself uplifted from its Practice Note 17 (PN17) status.

In a bourse filing, AAX said Bursa Securities had, vide its letter dated Oct 18, 2023, rejected the airline’s application for proposed relief and PN17 upliftment.

Bursa, however, has granted AAX an extension of time until Jan 17 next year to submit its regularisation plan to the regulatory authorities. Its latest extension is due to expire on Oct 28. AAX had been granted an extension to submit its regularisation plan on two occasions, first for six months to April 28, and then for a further three months till July 28 this year.

"In this regard, the airline will consider all available options (including the possibility of an appeal) and announce the next course of action to be undertaken in due course," said AAX.

While the reason for Bursa's rejection was not disclosed, an investment analyst believes it could be due to increased scrutiny of airlines after what happened to another low-cost peer MYAirline Sdn Bhd recently. Cash-strapped low-cost carrier MYAirline abruptly suspended operations on Oct 12, citing financial pressures 10 months after it took to the skies.

"The knock-on effect is AAX's sister company Capital A Bhd having its own PN17 regularisation plan knocked back.

"Capital A needs AAX to get out of PN17 first, then sell its four short-haul airlines to AAX to get out of its own PN17 status," the analyst tells The Edge Malaysia.

He expects a knee jerk reaction to both AAX and Capital A counters after the midday break.

At noon close on Thursday, AAX shares were still up two sen or 0.89% at RM2.27, while Capital A shares settled down one sen or 1.08% at 92 sen.

Following the announcement, AAX shares hit its intraday low of RM1.88 in the afternoon session before paring some losses to close at RM2.09, still down 16 sen or 7.11% from Wednesday’s closing price. Its market capitalisation stood at RM934.4 million.

Capital A’s share price, meanwhile, touched its intraday low of 87 sen in the afternoon session before settling at 88.5 sen, down 4.5 sen or 4.84% from Wednesday’s closing price. Its market cap was RM3.7 billion.

Year to date, AAX has gained 248.3% from when it was trading at 60 sen, while Capital A shares are up 36.2% from 65 sen.

On July 20 this year, AAX had applied to Bursa to be uplifted from PN17 altogether, on recent improvements in the group and its subsidiaries' financial performance. It also sought relief from having to submit and implement a plan to regularise its condition.

AAX slipped into PN17 status in October 2021, while Capital A did so in January 2022, after accumulating Covid-19 pandemic-led losses, which resulted in negative shareholder equity for both companies.

Both Capital A and AAX share common shareholders — Capital A co-founders Tan Sri Tony Fernandes and Datuk Kamarudin Meranun.

The top shareholders of AAX are Kamarudin, who holds an 8.94% direct stake, and Fernandes, who holds a 2.69% direct stake, as well as an indirect stake of 31.59% through Tune Group Sdn Bhd (17.83%) and AirAsia Bhd (13.76%). Both Kamarudin and Fernandes also hold an indirect stake of 24.61% in Capital A through Tune Live Sdn Bhd (12.23%) and Tune Air Sdn Bhd (12.4%).

Read also:
AAX slumps after Bursa rejects its application for relief, PN17 upliftment
Anticipation builds for divestment of Capital A’s aviation business; analysts expect valuation of below RM5 bil
AirAsia X submits application to exit PN17, confirms The Edge report