Capital A, previously known as AirAsia Group Berhad, will likely spin-off its AirAsia airline business as a separate unit on the Malaysian stock exchange, once market conditions improve. It is also likely that AirAsia will establish another airline within the South East Asian ASEAN region within the next few months. AirAsia eyes future growth under new business structure.
AirAsia Group is in the midst of a deep restructuring of its brands and activities to focus more on the strengths of each of its six activities. To underline this, it rebranded its name into Capital A earlier in January. Along fintech business BigPay, logistics company Teleport, service provider Super App, and aircraft engineering company Asia Digital Engineering, AirAsia and AirAsia X are ‘just’ two businesses that require a different and dedicate approach.
AirAsia Aviation Limited has now been renamed AirAsia Aviation Group Limited (AAAGL), which it says is more than just a name change: “The name change reflects the aviation group’s recovery and growth strategy by consolidating all of its airline operations under one entity to focus expansion of the business within the larger ecosystem”, it said in a presentation on February 11.
“The structural changes are also to provide a separate, robust and lean platform for the airline operations, now that the Group is much more than an airline. Under the new structure, AAAGL will oversee all airlines in the Group and related support functions including AirAsia Consulting, shared corporate services division AirAsia SEA, the Santan food group and the ground handling services joint venture business called GTR.” Current Group CEO Bo Lingam stressed that AAAGL is to become “one of the key pillars under Capital A.”
Tony Fernandes concentrates on Capital A
A significant change is that AirAsia founder Tony Fernandes no longer will lead his airlines directly as he concenrtates on Capital A and Group CEO. AAAGL gets an indepent board of directors under an independent non-executive chairman. Tan Sri Jamaludin has been recently appointed in this role. He joins the airline group from Prasarana Malaysia Berhad, Malaysia’s urban rail services company, with previous experience at financial management company Axiata Group and before that Maxis Communications. He is fresh to the airline industry and will more offer guidance and advice and leave the daily operations to Lingam and the rest of the team.
“The plan is to assemble a balanced mix of industry leading professionals with diverse backgrounds and complementary skills. It is envisaged that the board will comprise some of the best in their respective areas including well- known figures from the various countries it operates in to ensure diversity in nationalities, skills and gender”, says AirAsia.
Bon Lingam said that AAAGL has strong growth plans for AirAsia in the post-Covid era. Asia has been hit very hard by continuous border closures and travel restrictions, which severly impacted all airlines in the region. AirAsia X low-cost, long-haul network was practically eroded while AirAsia’s subsidiaries in Malaysia, Indonesia, The Philippines, Thailand, and India also suffered heavily. With more countries gradually opening up again, Lingam hopes that the industry can enter a different phase that leads to full recovery.
“Importantly, the future growth of the aviation group will be expected to come from new ventures, partnerships, geographies and adjacent businesses, expanding the aviation group’s broader ecosystem”, Lingam said. Part of this strategy could be purchasing Malaysian cargo airline Raya Airways, The Edge Markets reported earlier this week. Until now, AirAsia has had only limited exposure on the booming cargo market, operating as single Boeing 737 out of Bangkok though its Teleport logistics subsidiary.
Raising fresh capital when the timing is right
Growing AirAsia likely means spinning off AAAGL as a separate entity of Capital A, which could be attractive to investors that are only interested in the airline business. Fernandes reportedly said during a press conference that raising fresh capital will be decided by the board and at the right time.
AirAsia is particularily interested in gaining market share in a number of South East Asian countries, notably Indonesia. Traffic figures for December 2021 of AirAsia Indonesia were 57 percent down in Q4 and at -63 percent for the full year, together with AirAsia Thailand the weakest performers within the Group. It also has an eye on Cambodia, which is another emerging market that until now is only served by a limited number of local airlines like Cambodia Airways.
