AirAsia to acquire 40% of Zest Air

Malaysian low-cost carrier to manage PH firm

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Local budget carrier Zest Airways and Malaysia’s AirAsia group are forming a strategic partnership in the airline business in a bid to create a stronger player in the highly competitive Philippine aviation industry.

Inquirer sources said AirAsia, led by Malaysian businessman Tony Fernandes, and ZestAir, led by the group of Filipino-Chinese tycoon Alfredo Yao, were moving toward a deal that would allow the Malaysian group to acquire at least 40 percent of ZestAir.

Yao, founder of the Zest-O group and chairman emeritus of newly listed Philippine Business Bank (PBB), is expected to keep majority ownership of ZestAir but might cede management control of the airline in favor of the Malaysian carrier.

Under the Philippine Constitution, foreigners cannot own more than 40 percent of certain industries like transportation, real estate and utilities in order to protect public interest. But AirAsia has a local affiliate that is majority-owned by Filipinos.

The negotiations have reached an advance stage toward the prospective airline alliance, the sources said.

An alliance is seen allowing AirAsia, a regional player but a new entrant in the Philippine airline sector, to gain a foothold in the local market at a faster pace, especially with formidable rivals like the Gokongwei-led Cebu Air and flag carrier Philippine Airlines/AirPhil Express dominating local skies. Meanwhile, competition in the airline industry is heating up not just in the Philippines but across the region, including in AirAsia’s home market.

AirAsia earlier entered the Philippine market through local unit AirAsia Inc., a consortium that is 40-percent owned by Fernandes while local businessmen Antonio “Tonyboy” Cojuangco Jr., Michael Romero and Marianne Hontiveros each own 20 percent.

Malaysian-Indian founder Fernandes rose to fame after turning AirAsia, once a cash-strapped government-owned airline, into a profitable enterprise using the “no-frills” model with the tagline “Now everyone can fly.” It is a similar model eventually adopted by leading local low-cost carrier Cebu Pacific.

A study released by CIMB of Malaysia in September last year said mergers and acquisitions (M&As) would be the way to go for the Philippine airline industry as tough times would likely prevail in the next three to five years. The study noted that oversupply was building while yields were falling amid cutthroat competition and some structural constraints.

Over the long term, the report said the Philippine aviation industry has a substantial growth potential, with only 5 percent of its population flying. Despite a population close to 100 million and despite its archipelagic nature that makes it ideal for air travel, CIMB noted that the Philippines had one of the smallest aviation markets in Asia. CIMB estimated that the Philippine aviation market was only 40 percent of the size of Thailand’s and 20 percent the size of Malaysia’s although it was about 20 percent bigger than Indonesia’s.

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Disclaimer: The comments uploaded on this site do not necessarily represent or reflect the views of management and owner of INQUIRER.net. We reserve the right to exclude comments that we deem to be inconsistent with our editorial standards.

  • http://www.facebook.com/george.morales.735507 George Morales

    Dear JunF, hinde ka sasagutin ng Inquirer kahit anong luhog mo pa.  Ako na lang ang sasagot sa iyo.  Ang PAL at Airphil ay iisahin na lang.  PAL ang surviving airlines kaya baka PAL policies na ang sunurin ng Airphil.  Kung ikaw ay naglalakbay domestically, mapapansin mong binago na ang kulay ng mga Airphil na eroplano.  Kulay na ng PAL ang mga eto.

  • http://pulse.yahoo.com/_QMVFEZCLD44BJEIEJHBJU7GMPA junF

    Dear Inquirer,

    Sana po kayong lahat ay nasa magandang kalagayan lagi.
    Sana po ay mabigyang pansin, malinawan at matulungan nyo kaming mga ilang libo-libong OFW.
    Ito ay patungkol sa allowable baggage ng Airphil domestic flights na 10kg. lang!
    kung kami ay galing sa overseas ang aming allowed na bagahe ay 30kg ang pinakamababa at ang ilang airlines ay umaabot sa 45kg. bawat
    pasahero.

    Pero kung may connecting flight kami papunta sa visayas or mindanao napakalaki ng problema dahil ang excess sa 10kg allowed ng
    airphil ay aming babayaran ng mahigit na 100 pesos sa bawat kilo.

    Ang karamihan po sa amin ay halos kakapiranggot ang suweldo at kakapiranngot ang dalang pera para sa panggastos sa pinas.

    sana po ay maintindihan nyo ang aming problema.

    bakit kaya napakaliit ng 10kg na allowed ng airphil. kahit ho 20Kg ang allowwd sigurado magbabayad pa din ang mga pasahero.

    salamat po at nawa’y matulungan nyo kami.

    gumagalang,

    (tawagin nyo na lang po akong)

    mario

  • http://www.facebook.com/babinski.tero Babinski R Tero

    Pasabugin ang airlines na yan. Mga kawatan.

  • http://mikkieugenio.tumblr.com/ Paul Eugenio

    Yehey! Air Asia PH flights from Manila/NAIA!!!

    • http://www.facebook.com/babinski.tero Babinski R Tero

      Pasabugin ang airlines na yan, mga kawatan.

  • binangkal

    haha..ano connection dun sa business at tsaka land dispute

    • http://www.facebook.com/babinski.tero Babinski R Tero

      Pasabugin ang airlines na yan, mga kawatan.

  • http://pulse.yahoo.com/_W7TPARCYJFCSA3PBQAM3MVZO3E kurakut

    CAUTION ZEST AIR: BAKA KAININ KA NG MALAYSIAN AIR ASIA. GANYAN ANG NANGYARI SA SABAH. 

    • http://pulse.yahoo.com/_A5B6G6DFLT7HKQX4HEJNN5VLVY neo

      This is purely business.  Did you really read the news?  Only 40% can be owned by foreign companies. Filipinos maintain 60%.  That’s the law.  Read and understand, get the facts before you say something moronic.

      • http://mikkieugenio.tumblr.com/ Paul Eugenio

        Bili ka na lang ng Air Asia PH/Zest Air stock kapag nag-IPO sila. Hehehehe.

      • http://www.facebook.com/babinski.tero Babinski R Tero

        neo, kahit na, mag nanakaw parin sila.

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