Capital A to sell AirAsia Aviation Group to AirAsia X

In an interesting twist of the company’s history, AirAsia parent company Capital A is selling its airline business AirAsia to AirAsia X, the low-cost long-haul sister airline that was established in 2007. With the proposed transaction, AirAsia should benefit from a better focus on its aviation activities, Capital A CEO Tony Fernandes said on January 8. AirAsia X and Capital A have agreed on a non-binding letter of acceptance to acquire AirAsia Berhad and AirAsia Aviation Group Ltd for an undisclosed sum. The transaction combines the long-haul operations of AirAsia X and the short and medium-haul network of AirAsia Berhad in Malaysia, Thailand, Indonesia, the Philippines, and Cambodia. The acquisition, referred to as “groundbreaking” by AirAsia X, should bolster the market position of the two airlines and result in various operational efficiencies and synergies. In a media statement, AirAsia X CEO Dato Fam Lee Ee, said: “Leveraging the strengths of all airlines under the AirAsia brand, we are poised to create a pure-play entity that propels us forward. The synergy created through these strategic acquisitions represents more than just a financial consolidation; it symbolizes our role as a trailblazer in shaping the future of the aviation industry. The future holds immense potential, and we are excited to embark on this transformative journey.” Financial stability Concluding the transaction has become easier since last November when after two years, Bursa Malaysia lifted AirAsia X’s Practice Note 17 status. This status reflected concerns about the financial health of the company, which has gone through a troubled period during the pandemic. “These strategic acquisitions serve as pivotal milestones in AAX's post-PN17 revival strategy, bolstering our financial stability and enhancing our market positioning. The consolidation under the AirAsia brand as a one-listed entity reflects our commitment to capitalize on our regained strength and market confidence to deliver a unified and unparalleled travel experience for our guests and significant value for our shareholders,” Dato Fam Lee Ee added. Details of the proposed acquisition will be shared in due course, AirAsia X says. Completing the deal could take some six months as Capital A needs to present a regularization plan no later than June 30. Rebranded in 2022 AirAsia's history dates back to 1993 when it launched as a full-service carrier. It changed its business model to a low-cost three years later and grew the Malaysian airline with several subsidiaries in other Asian countries. AirAsia X was established as a dedicated long-haul carrier in 2007. It targeted aggressive growth and had 100 Airbus A330-900s on order when it placed a follow-up order at the 2018 Farnborough Airshow. In January 2022, AirAsia Group rebranded as Capital A.. The idea was that a new name would better reflect the group’s core businesses, which not just included the airline but eleven brands like AirAsia Travelapp, MRO company Capital A Aviation Services, logistics company Teleport, banking subsidiary bigpay, grocer, a venture company and a few aviation-related subsidiaries. Back then, Fernandes already indicated that AirAsia Aviation Group Limited might be spun off as a separate company on the Malaysian stock market but only when the timing was right. In a statement, Fernandes said on Monday: “All businesses across Capital A have been thriving and we are ready to grow. We need to raise funds for business expansion, but gaining access to capital has been challenging due to Capital A’s Practice Note 17 (“PN17”) status. We have been engaging committed investors who have expressed a strong preference for a pure aviation play.” “To address this and to ensure a robust financial injection, we are strategically pursuing the sale of the aviation business to AAX to create an aviation pure play, consolidating both long and short-haul airlines under the AirAsia brand, subject to the negotiation of a definitive share sale and purchase agreement and its completion. Following the disposal, the aviation business is poised to benefit from focused management and a well-defined strategic direction, which will boost the aviation business’s capacity to seize growth opportunities, expand market share, and ultimately achieve enhanced profitability.” Fleet AirAsia’s combined fleet includes 239 aircraft, of which 166 are Airbus A320ceo, 39 A320neo aircraft, three A321ceo’s, four A321neo’s, and 25 A330-300s. The group has 366 A321neo’s on order. AirAsia X has a fleet of 18 A330-300s, including two A330-900s of Thai AirAsia X that are parked. The carrier has 15 -900s on order. In April 2022, AirAsia X canceled an order for 63 A330-900s.

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