AirAsia share deal to help Malaysia Airlines— reports | Inquirer Business
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AirAsia share deal to help Malaysia Airlines— reports

/ 08:05 PM August 07, 2011

KUALA LUMPUR—Southeast Asia’s largest budget airline AirAsia looks set for a major share swap with Malaysia Airlines in a deal to help save the struggling national flag carrier, reports said Sunday.

The agreement could see Malaysia-based AirAsia’s owner gain 20 percent of the equity in its loss-making rival, the Star and New Straits Times dailies reported.

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The papers, quoting unnamed sources, said that a partnership deal between the long-time rivals could be signed within days.

“It’s a done deal, and it would mean that we could compete better,” the Times quoted a source close to the deal as saying.

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Malaysia Airlines in a statement to AFP declined to comment, saying that “this is a shareholder matter.”

A spokesman for Khazanah Nasional Bhd, which owns about 70 percent of the national flag carrier, also declined to comment, saying it was company policy not to comment on “speculation.”

The Star reported the deal negotiated over the past year was struck last week to save the struggling national carrier.

Under the deal, Khazanah would get a stake in AirAsia, while Tune Air Sdn Bhd, which owns 26 percent of AirAsia, would get a stake in Malaysia Airlines. Tune Air is helmed by Malaysian tycoon and AirAsia CEO Tony Fernandes and another partner.

Fernandes and his partner said in a joint statement that they would not become the single largest shareholder in Malaysia Airlines but did not elaborate further.

“As the major shareholders of AirAsia Bhd and AirAsia X Sdn Bhd (which operates long-haul budget flights), we are committed to increasing shareholder value in both our core investments by continuously exploring various opportunities to enhance our franchise,” they said.

The deal would allow Malaysia Airlines and AirAsia to combine their flight frequencies and destinations. It would also increase their bargaining power with airports and aircraft makers.

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“It’s positive for Malaysia’s airline industry giving the growing competition globally,” Yeah Kim Leng, chief economist with financial research firm RAM Holdings, told AFP.

“The market is a bit small to have two large carriers emerging… An agreement to work together will bring benefits to both so that they can avoid duplication and share any resources,” Yeah added.

He said the two airlines complemented each other – with AirAsia specializing in low-cost flights, while Malaysia Airlines catered to a more upmarket segment.

Malaysia Airlines chairman left the company last month as it restructures its top team in a bid to return to profit.

The carrier posted a first-quarter net loss due to rising fuel prices and a strengthening ringgit. AirAsia recorded a first-quarter profit.

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TAGS: Air Transport, AirAsia, Airline, Malaysia, Malaysia Airlines
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