(Reuters) -Malaysia's Capital A, which owns airline AirAsia, said on Thursday its shareholders and debtholders approved a capital reduction plan of up to 6 billion ringgit ($1.4 billion), as the company aims to shrug off its 'financially distressed' tag.

Capital A was severely impacted by pandemic-era travel curbs and its equity declined to below 50% of subscribed capital, due to which it was designated as a 'PN17' financially distressed entity by Malaysia's stock exchange in 2022.

Last month, the company announced the capital reduction plan to bolster its balance sheet and offset losses, which amounted to 475.1 million ringgit last year.

Capital A said it will seek the country's high court's confirmation for the capital reduction plan, and that is on track to exit the PN17 status by the middle of this year.

Besides the capital reduction, Capital A's proposed regularisation plan includes divesting its aviation business to long-haul affiliate AirAsia X, which shareholders have already approved.

This will help the company pivot toward non-aviation ventures, with a strategic focus on expanding its digital services and logistics operations. ($1 = 4.2650 ringgit)