KUALA LUMPUR (July 17): AirAsia X Bhd (AAX) rose as much as 16 sen or 10.19% to RM1.73 in Monday (July 17) morning trade after The Edge reported that the medium-haul budget airline is ready to make an application to lift itself out of Practice Note 17 (PN17) status this week, ahead of the July 28, 2023 deadline to submit its regularisation plan to Bursa Malaysia.

At the time of writing, AAX had pared its gains to close at RM1.68, up 11 sen or 7.01% from its Friday (July 14) closing price of RM1.57, giving it a market capitalisation of RM751.08 million.

It was the 10th top gainer on the local bourse, with 11.52 million shares traded.

Meanwhile, shares of AAX’s sister company Capital A Bhd closed half a sen or 0.59% higher at 85 sen, with 7.98 million shares traded and a market capitalisation of RM3.52 billion.

The regularisation plan is crucial as it is supposed to lift not just AAX, but also Capital A out of PN17 status. It is widely expected that the regularisation plan involves Capital A injecting its aviation business into AAX via an issuance of shares.

Capital A and AAX are both in the midst of preparing their respective regularisation plans. Capital A's submission deadline, after several extensions, is in October 2023 while AAX's submission deadline is on July 28, 2023. 

The Edge reported in its July 17 issue that the affiliate of Capital A is planning to make an application to Bursa Securities to leave the category of financially distressed Main Market-listed companies, as it no longer triggers any of the PN17 criteria.

The report said AirAsia X will no longer be pressured to acquire Capital A's airline businesses, which is part of a regularisation plan initially proposed to enable the company and Capital A to exit the PN17 status.

An aviation analyst at a bank-backed research firm said there were many conditions that went into the lifting of PN17 status, which includes having shareholders' equity exceeding RM40 million.   

The analyst noted that AAX's shareholders' equity had risen to RM40.76 million in the first quarter ended March 31, 2023 (1QFY2023) from a negative RM599.9 million in the preceding quarter; moreover, it had also recently raised RM50 million through a private placement of shares which will increase its shareholders' equity further to RM90 million.

In addition, AAX has also reported three straight quarters of profitability, notching a net profit of RM328 million in 1QFY2023 after writing off RM33 billion of liabilities and provisions of liabilities back to profit.

The low-cost carrier fell into PN17 status in October 2021 after its external auditor Messrs Ernst & Young PLT questioned the airline's ability to continue as a going concern in its audited financial statements for the 18 months ended June 30, 2021.

AAX then logged a net loss of RM33.72 billion for the period, while its current liabilities exceeded current assets by RM34.21 billion, while its shareholders' deficit stood at RM33.58 billion.