AirAsia scuttles ‘risky’ plan to buy Indonesian carrier

PHOTO FROM BATAVIA-AIR.COM

JAKARTA, Indonesia—Southeast Asia’s largest budget airline AirAsia has scrapped plans to acquire Indonesian carrier Batavia Air because the move was too risky, its chief executive said Monday.

“In our minds, the timing was perhaps not appropriate as it would have induced too many risks,” AirAsia Group CEO Tony Fernandes said in a statement, repeating his carrier’s “aggressive focus” in Indonesia and plans to list in the country.

Last week a source familiar with the deal said the Malaysian tycoon wanted to raise up to $550 million by listing shares in the long-haul arm and Indonesian unit of AirAsia as well as in his insurance firm.

AirAsia cited the time it would take to integrate the two airlines, including rebranding and merging working cultures, as a reason for scrapping the deal.

AirAsia announced the $80 million purchase plan in July to increase its presence in the region and specifically Indonesia, which has seen a surge in passenger numbers over recent years.

The carrier has moved its base from Kuala Lumpur in Malaysia to Jakarta to get closer to Indonesia’s burgeoning aviation market, which potentially caters to nearly 240 million people across 17,000 islands.

The budget carrier wants to triple its fleet in the five years from 2013 to meet passenger demand.

Indonesia’s domestic airlines carried more than 60 million passengers last year, and the Indonesia Air Carriers Association predicts a 52 percent increase in passenger numbers by 2015.

Despite dropping its interest in its Indonesian rival, AirAsia has proposed working more closely with Batavia on areas including ground handling and a pilot training scheme.