With the proposed acquisition of AirAsia by AirAsia X has proceeded, Group CEO Tan Sri Tony Fernandes has issued a statement answering some important questions that was not shared during the press conference nor to shareholders
The deal will see Capital A separating itself from the airline business while AirAsia and AirAsia X will become AirAsia Group solely focused on flights. On why the separate airlines where not joined together then but is now merged, Tony pointed to aircraft technology.
According to him, in the past short haul aircrafts could only serve within the region while medium haul required different set of fleets and came with its challenges. However with improvement in technology the new planes like the A321LR and A321XLR allows better efficiency allowing the network to fly longer distances without the need for widebody aircraft, enabling AirAsia to operate a single type of aircraft across both short and medium-haul routes.
The CEO said even though sceptics may point out that the A321LR and A321XLR will have approximately 100 seats less than a widebody A330, Tony said the cost savings on the trip cost per flight far outweigh the lower passenger revenue – the margins are expected to be significantly higher according to information from Airbus. This he adds is of course subject to actual operational performance when these aircraft go live later this year.
On needing to expand fleets, Tony said Capital A currently has an aircraft orderbook of almost 400 aircraft with an ongoing, immediate delivery timeline up to 2035. Through the proposed transaction, AirAsia X gains access to this orderbook and can grow immediately as part of AirAsia Group. Tony also noted that bringing together AirAsia X and AirAsia Aviation in a single entity proposed to be AirAsia Group will mean that all AirAsia-branded airlines are now in a single entity hence becoming ASEAN’s largest low-cost airline.
Tony said over the next five years, the group plans to leverage this new range into connecting Asean to Europe, Africa, Central Asia and North America.
To shareholders, the group said they will access to a larger airline group including a low-cost carrier group with a time-tested business model that is profitable and resilient. Following the proposed transaction, AirAsia Group will issue free warrants to existing shareholders With the free warrants that are given exclusively, existing shareholder will gain the opportunity increase their equity participation and be a part of the future growth of this enlarged aviation business, which Tony said will have a much fortified financial foundation that will be achieved before the proposed acquisitions, effectively increasing the financial strength of the entity you will be a part of.
