Thanks again for all your replies. As other posters had warned, Air Asia completely abandoned my friend in the end. Or anyway we think they did. No one has ever bothered to reply to any of the calls or emails he sent. For a while they claimed they had only one English-speaking agent in Hong Kong and that person seems to spend the entire day at lunch.

My friend (Pax B) will just buy a new ticket, though at significantly higher cost on another carrier. This is only possible because Pax A has stepped up and offered to help out with the extra money Pax B is out (jiejie may be right about Pax A confusing things by trying to cancel when he did, but ultimately this was 100% Air Asia's failure since it was clear as day in all his communications that he was only cancelling his own tickets so it's really generous of him to step up like this).

Ironically, this has cost a lot of money but my friend is better off than a couple other friends traveling with him who didn't get their Air Asia itineraries cancelled. They still haven't heard back about rebooking on MH for the BOM-KUL return. It could end up that my friend will be the only one able to get back from India!