AirAsia plans $500M infusion in PH operations

In this photo released by Team Pacquiao, Filipino boxer Manny Pacquiao, left, and budget airline AirAsia owner Tony Fernandes, hold a cutout of the airline’s new design designating Pacquiao as its new ambassador Wednesday, Nov. 12, 2014 at General Santos City. AirAsia is investing another $500 million to expand its Philippine operations should the group gain a long-delayed approval from Congress to consolidate its local business, Fernandes said on Wednesday. AP PHOTO/MIKE YOUNG, TEAM PACQUIAO

MANILA, Philippines–Malaysia’s AirAsia Berhad, one of the region’s biggest budget carriers, is investing another $500 million to expand its Philippine operations should the group gain a long-delayed approval from Congress to consolidate its local business, its top official said on Wednesday.

Malaysian tycoon and AirAsia founder Tony Fernandes said the consolidation was part of the company’s strategy for AirAsia Philippines to return to profitability by 2015, acquire more planes and compete with rivals here such as flag carrier Philippine Airlines and budget carrier Cebu Pacific.

A key part of the consolidation was for AirAsia Inc., which AirAsia Bhd. owns with Filipino partners, to increase its 49-percent stake in AirAsia Zest to a controlling share.

AirAsia Zest is currently controlled by juice and banking magnate Alfredo Yao, who has expressed his willingness to sell, but the deal has been held back by a delay in the Philippine Senate.

“It’s taking so long. It’s not good for business and it’s not good for investments,” said Fernandes, adding that he still hoped they could secure the Senate’s approval within 2014.

The Senate committee on public services, which oversees public utilities, services and the granting of legislative franchise such as the one held by AirAsia’s local units, was chaired by Sen. Ramon “Bong” Revilla Jr.

This was before Revilla’s arrest this year on graft and plunder charges for his alleged involvement in the pork barrel scam. He was replaced by acting chair Sen. Sergio Osmeña III, information on the Senate’s website showed.

“We’ve put in $100 million already in cash terms [into AirAsia Inc.], excluding the planes. And we are committing another $500 million once we get the franchise approval. That’s over a period of three to four years,” Fernandes said.

Its units AirAsia Philippines and AirAsia Zest currently operate more than a dozen Airbus A320s operating mainly out of Manila’s Ninoy Aquino International Airport, Cebu and Kalibo. The fleet would at least double once the group gets the go-ahead to consolidate domestic operations, Fernandes said.

“As soon as we get the franchise, we should be able to get 15 aircraft. Then I hope we can add about five aircraft a year,” he said.

“My aim is to grow Philippines AirAsia in the international [market]. It’s adding more flights in Korea, eventually China and Japan and Asean and bringing these people to the Philippines like we’ve done in Indonesia and Thailand,” Fernandes said.

“I feel a strong optimism now that we’ve been through the worst. Our backs have been against the wall and that’s actually when we’re best. In many ways we are like the boxer on the ropes,” he added.