AirAsia Acquires Indonesia’s Batavia Air For RM255m
AirAsia Bhd, the biggest low-cost carrier on the continent, is seeking to further consolidate its position by making its first major airline acquisition.
On Thursday it was announced that the Malaysian airline would buy up Indonesia’s Batavia Air.
The purchase, partly made through the Malaysian carrier’s Indonesian subsidiary, is said by some to be a show of force against the main competition there, Lion Air.
But it will also up the stakes against other regional rivals like Tiger Airways Holdings Ltd and Singapore Airlines Ltd – particularly after the Southeast Asian open-sky policy comes into effect in 2015.
Air Asia chief Tan Sri Tony Fernandes called the acquisition a “huge step” and said on his Twitter feed that his airline was now a “major player in Indonesia.”
“This news in Indonesia will have a very positive effect on our earnings over the next few years,” he tweeted.
Fernandes said in early May that his group was looking to list its Indonesian operations by the first quarter of 2013 as it moves its regional base to Indonesia to focus on further expansion.
The Internet penetration of AirAsia Indonesia in terms of ticket bookings is currently not as great as Malaysia or Thailand – something which is seen as key to the value AirAsia recognises with the purchase of Batavia Air.
After the signing ceremony, a press conference on Thursday afternoon revealed that AirAsia will buy a 76.95 per cent stake in the short term, and the rest by 2013 for a total of RM255 million in cash.
The Malaysian parent company will own 49 per cent of Batavia Air while AirAsia Indonesia will keep control of 51 per cent in order to comply with Indonesia’s business ownership rules.
Meanwhile the rest of the Air Asia family is busy gearing up for a similar regional consolidation effort.
Air Asia X for example recently dropped its London flights to focus hard on connections across Southeast Asia. CEO Azran Osman Rani gave an interview on ABC in Australia on Thursday morning where he spoke about the company’s plans for expansion in Australia.
“I always see a lot of opportunities coming out of times like this,” he said.
“What you went through in Australia in 2008, 2009, 2010, it’s been crisis after crisis, but travel has always been very resilient.”
Australia currently represents about 30 per cent of the business for AirAsia X, and with the company expecting to double its fleet size by 2014, the AirAsia X chief said he expected to maintain that 30 per cent ratio – effectively looking to double its presence over the next two years.
After a challenging start to the year, AirAsia returned to a positive cash flow from June and the second half of 2012 looks promising – helped partly due to the respite in fuel prices. The Batavia acquisition will likely cement the turn-around. –The Choice