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AirAsia in Hot Soup

Malaysian Aviation Commission (MAVCOM) had, three days ago, issue a media statement in which it said it would exercise its statutory powers if Airasia X Berhad does not reimburse air travel consumers for tickets purchased.

by K. Vatsala Devi
air asia fleet grounded

Many industries were brought to a halt when the covid-19 pandemic hit countries across the globe. One of the hardest hit industries was the aviation industry. While different countries imposed different restrictions to curb the pandemic, in general a standard template that included a travel ban was adopted and that put Malaysia Airlines and AirAsia, alongside other airlines companies in trouble. 

“The aviation industry was impacted greatly by the spread of coronavirus, with the number of global passengers decreasing drastically in 2020. Over 4.5 billion passengers traveled globally before the pandemic; this number fell to roughly 1.76 billion after the virus began to spread” – reported Statistica on their website.

The pandemic is an unprecedented situation, and no one could have predicted the severity of the pandemic. Up till now, many countries are still battling the third and fourth waves of the virus. So, if you have had to cancel that trip to Norway to witness the Northern Lights (that you had made in late 2019 or before the pandemic wreaked havoc) it is totally understandable. And it is completely alright that if you decide to want a full refund.

Since the pandemic dominated, many airlines including Air Asia had grounded their fleets and up until mid-2021, people were unsure when travel for work or leisure would resume. With so much uncertainty, wouldn’t it be sensible for airline companies to offer credits that expires perhaps in 2022 or a full refund? Most companies have tried encouraging their passengers to accept credits but if passengers insisted then a full refund is accorded to them.  

AirAsia Fails to Look After Its Customers

AirAsia CEO failed to read the room
AirAsia Group’s CEO Tan Sri Tony Fernandes

AirAsia though has played a different game.

 After AirAsia Group’s CEO Tan Sri Tony Fernandes took to Facebook, a while ago, to post a video, in which he said the low-cost carriers have successfully refunded some 1.5 million claims since January 2020 and that it had another 450,000 people to pay back and that it will pay them back, there has been a twist in the story.

On 18 October 2021, AirAsia X Bhd (AAX) announced a proposal where it intends to only pay just 0.5% of debt owed to each of its creditors, who are technically the passengers, and to terminate all existing contracts as it tries to restructure, a document seen by Bloomberg showed.

Singapore’s Business Times reported that the carrier, AirAsia X, told creditors it is unable to meet immediate debt and other financial commitments based on its financial position and industry outlook. The low-cost airline has barely flown in 19 months since the early days of the Covid-19 pandemic. The Malaysian low-cost long-haul airline, a sister carrier to cash-strapped AirAsia Group Bhd (AIRA.KL), said in a stock exchange filing on Monday it had set a date of Nov. 12 for creditor meetings to vote on the restructuring proposal.

Could This Result in a Backlash for AirAsia?

This news definitely raised the ire of many passengers who have been waiting close to 18 months for a refund, which would have come in handy during the many lockdowns we, Malaysians had experienced. And it also didn’t help that while many passengers of Air Asia were waiting for their refunds to be completed, Tony Fernandes had – in September – bragged about his new ride, the Tesla Y which is estimated to cost RM230,000.

Focus Malaysia helps put the 0.5% in a clearer picture, in its article titled “AirAsia X passengers might as well kiss their refund prospects good-bye” written by Cheah Chor Sooi, where it explained to illustrate how much passengers can expect to get, the airline said anyone who is owed RM2,000 will get RM10 as “profit-sharing” on the anniversary of the approval of this exercise, adding that they will get similar returns for four years after that based on a specified formula outlined.

The Tesla Y was apparently a Merdeka gift to himself. How generous isn’t it? Wouldn’t it be nice if he extends the same generosity to his passengers as well?

So now what happens?

Malaysian Aviation Commission (MAVCOM) had, three days ago, issue a media statement in which it said it would exercise its statutory powers if Airasia X Berhad does not reimburse air travel consumers for tickets purchased.

Below is the statement from MAVCOM taken from its website:

In line with the Malaysian Aviation Commission’s (“MAVCOM”) mandate to regulate economic and commercial matters relating to civil aviation in Malaysia and its commitment to protecting air travel consumer rights, MAVCOM, on 11 November 2021, had issued a letter to AirAsia X Berhad (“AAX”) in response to its ongoing debt restructuring exercise. This letter follows from MAVCOM’s various earlier correspondence with AAX.

In this letter, MAVCOM has clearly and unequivocally urged AAX to reassess its proposal to treat air travel consumers as creditors and to pay only 0.5 per cent of the value of tickets purchased as announced on 18th October 2021. MAVCOM takes the view that air travel consumers ought not to be classified as “creditors” as the air travel consumers did not, inter alia, sell any products, provide services or make loans to AAX but instead have paid monies for the purchase of tickets in advance of their flights. Accordingly, MAVCOM reiterates its position that AAX should reimburse air travel consumers for the tickets purchased.

If AAX fails to reimburse the affected air travel consumers accordingly, MAVCOM will not hesitate to exercise its powers under the Malaysian Aviation Commission Act 2015 [“Act 771”].

AAX has repeatedly in its correspondence with MAVCOM and in their statements made to the public, given the assurance that AAX is committed to reimburse air travel consumers who were not able to fly due to flight cancellations.

MAVCOM is committed to discharging its duties under Act 771 and the Malaysian Aviation Consumer Protection Code in ensuring that air travel consumer rights are safeguarded.

Is there an end in sight for the plight of the many irate passengers?

Image credit : AirAsia Press Room

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