On Monday, Malaysia's Capital A Berhad said that it plans to sell its aviation business to long-haul unit AirAsia X Bhd, aiming consolidation of both its long and short-haul operations under one single AirAsia brand.
Company Capital A Bhd., that operates the budget airline AirAsia, will merge its aviation business as the group seeks to streamline its operations and gain better access to financing.
To take things forward, the company has now entered into a non-binding offer to sell its Malaysian airline unit and AirAsia Aviation Group Ltd. which has its subsidiaries in Thailand, Indonesia, Philippines and Cambodia , to the AirAsia X Bhd.
The announced proposal , pending a final agreement being signed and to approvals from shareholders and courts, involves the sale of AirAsia Berhad and AirAsia Aviation Group, and its subsidiaries, Group Chief Executive Tony Fernandes told reporters without revealing the value of the deal.
The restructuring comes as Capital A seeks to put forward a regularization plan to exit its financially distressed status , a classification that the company has had in the wake of the pandemic. The company has sought time until June to submit a plan to Malaysia’s stock exchange in a bid to uplift its status.
“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.
"We are confident that by separating the aviation business from Capital A, the non-aviation businesses within the group, which we feel are currently undervalued by the market, will also be recognised for their intrinsic value and potential. Capital A’s companies, including Teleport (logistics), Capital A Aviation Services (MRO and Inflight), and MOVE digital, will also be raising capital, offering shareholders an uplift on their Capital A shares, complemented by shares in the enlarged aviation group under proposed shares distribution. Following the sale of the aviation business, Capital A shareholders will become shareholders of the two strong listed companies. We believe this move will bring greater clarity to investments, create a more focused shareholder base, and ultimately unlock value for our shareholders.”
Chief executive officer Tan Sri Tony Fernandes said the strategic move is aimed at streamlining the group and facilitating a business-centric valuation of the separate entities, potentially unlocking greater value to shareholders. He said,
“We need to raise funds for business expansion, but gaining access to capital has been challenging,”
“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.”
AirAsia was founded in 2001 with two aircraft and has since become one of Asia's largest budget airline operator with a fleet of some 200 planes serving markets including Southeast Asia and China.
Fernandes said the group's airlines will likely return to full pre-pandemic capacity by the end of the first quarter. He said they have 400 planes on order and Airbus will start delivering new A321 aircraft by the second quarter of 2025.
Fernandes, who told the briefing that he intends to retire within five years, said the airline sale would help Capital A raise funds and focus on its non-aviation business, which includes payments firm BigPay, logistics arm Teleport, and online travel agency airasia MOVE.
“My dream, when I retire in five years, is to have five listed companies — one in the United States and four in Asean countries.”
The group also named two deputy CEOs for the budget carrier as part of its corporate restructuring.
Chester Voo will take up the role of deputy chief executive officer in charge of the airline operations, the company said in a statement Monday. The company named former banker Farouk Kamal as deputy CEO, whose responsibilities include finance, aircraft leasing, investor relations and strategy.
The separation of the airline business from Capital A will also allow investors to better value the non-aviation unit. Fernandes aims to have five listed companies under the group, he said at a briefing in Sepang, Malaysia.
An announcement has been made on this through Bursa Malaysia. Following the completion of the aviation disposal, Capital A is committed to presenting a comprehensive PN17 regularisation plan by 30 June 2024. Capital A is dedicated to transparent communication and will provide all stakeholders with detailed information throughout this process.
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