ADVERTISEMENT
Capital A to merge aviation business under AirAsia XShares of AirAsia X climbed as much as 7.3 per cent after the announcement, while Capital A rose more than 4 per cent before paring gains.
Bloomberg
Last Updated IST
<div class="paragraphs"><p>Representative image showing an&nbsp;AirAsia flight.</p></div>

Representative image showing an AirAsia flight.

Credit: iStock Photo

By Kok Leong Chan and Joy Lee

ADVERTISEMENT

Malaysia’s Capital A Bhd, which operates budget carrier AirAsia, will hive off its aviation business to its long-haul affiliate as the group seeks to streamline its operations and gain better access to financing.

The company entered into a non-binding offer to sell its Malaysian airline unit and AirAsia Aviation Group Ltd — which consists of its subsidiaries in Thailand, Indonesia, Philippines and Cambodia — to AirAsia X Bhd.

Shares of AirAsia X climbed as much as 7.3 per cent after the announcement, while Capital A rose more than 4 per cent before paring gains.

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.

“We need to raise funds for business expansion, but gaining access to capital has been challenging,” said Chief Executive Officer Tony Fernandes. “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.”

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.

Despite growing revenue, Capital A — which also has digital and logistics business — posted a net loss in the third quarter of 2023. Passenger traffic has recovered to about 78 per cent of pre-pandemic levels, the company said Monday.

It expects its capacity to rebound to 83 per cent of pre-pandemic levels by the end of this quarter and further recover. It will open routes from Kuala Lumpur to Africa this year, Fernandes said.

The group plans to have a fleet of 33 planes by 2028.

ADVERTISEMENT
(Published 08 January 2024, 14:41 IST)