Malaysia’s major airlines join forces
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Malaysia’s biggest airlines have announced plans to join forces. National carrier Malaysian Airline (MAS) and its low-cost rivals, AirAsia and AirAsia X, have entered into a new partnership agreement which will see each party take a stake in the other’s business. Tune Air Bhd and Khazanah Nasional Bhd, the major shareholders of AirAsia and MAS respectively, have agreed to acquire from each other existing shares of both companies. As a result, Tune will hold 20.5% of shares in MAS and Khazanah will hold 10% of shares in AirAsia. Khazanah will continue to be the single largest and major shareholder of MAS. In addition, Khazanah proposes to acquire 10% of shares in AirAsia X.
The airlines will also issue free warrants to each other’s shareholders, with MAS shareholders being granted approximately one warrant in AirAsia for every 30 MAS shares held, and AirAsia shareholders being granted approximately one MAS warrant for every 10 AirAsia shares held.
On a practical level, the airlines said they intend to review their network services, with plans to combine their offerings with interline agreements on certain routes, including new destinations. Other future areas of cooperation include training, maintenance, catering and cargo services. As a result, MAS said that Firefly – its existing low-cost carrier subsidiary – will be remodelled into a full-service regional carrier.
A Joint Collaboration Committee (JCC) has been formed to implement the agreement, which will be chaired by MAS board member Mohamed Azman Yahya with other members including MAS Executive Director Mohammed Rashdan Mohd Yusof, AirAsia Group Chief Executive Officer Dr Tony Fernandes and AirAsia Deputy Group CEO Kamarudin Meranun.
MAS Chairman, Md Nor Yusof said; “The signing of the Collaboration Agreement heralds an exciting new era of cooperation whereby the airlines involved will stand to gain significantly by tapping the benefits of working together. We believe that the joint collaboration will help MAS focus on our strengths in our core markets and work towards deriving higher loads and more efficient resource utilisation. We will also be able to offer services in engineering and other areas to both AirAsia and AirAsia X.”
AirAsia Group Chief Executive Officer, Dr Tony Fernandes added; “By focusing on core competencies, it will enable both parties to increase product offerings to our respective customers. AirAsia and AirAsia X see growth opportunities in new routes and destinations. Our business model requires us to continue to reduce prices in order to increase volumes for consumers in the low cost travel segment which we can now focus on in a more significant way.”
Khazanah Managing Director, Azman Mokthar said’ “This historic collaboration we believe is both synergistic and pragmatic. It will sharpen the focus of core competencies, deliver better product and choice for customers and ultimately create greater value for all stakeholders. Aviation has a very high economic multiplier, estimated at some 12 times according to a study commissioned by Khazanah. In that regard, this will significantly enhance national competitiveness in line with the government’s Economic Transformation Programme.”
He added; “The transaction has been pragmatically structured in that the business models, brands, Boards, governance structure, and indeed culture remain distinct and separate yet is now complemented by the Comprehensive Collaboration Framework. Malaysia Airlines position as the national carrier is also unquestioned with Khazanah firmly positioned as its 49% and single largest shareholder augmented by the special shareholder position of the Government. Concurrently, Khazanah is also very pleased to be investing in and in collaboration with a home-grown regional champion, AirAsia. All this we believe will also augur well for better connectivity and KLIA’s position as a hub and Khazanah’s adjacent investments in airports, leisure and tourism and Iskandar Malaysia.”
Tune Air co-founder and major shareholder Kamarudin Meranun said; “We are delighted with Khazanah’s entry as a major shareholder in AirAsia. Tune Air is also excited to become a significant shareholder in MAS. We see great value creation opportunities in the three companies for the benefit of all shareholders. This also augurs well with the Tune Group’s pursuit of providing comprehensive lifestyle products and experience, both affordable and premium, through our existing investments in sports and entertainment.”
All tie-ups are subject to completion of a full anti-trust review by all three companies.
Pic courtesy of Imagemaker/Shutterstock.com
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