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AirAsia to forge ahead in Indonesia

Publication Date : 15-10-2012

 

The PT Batavia Air acquisition deal is off for AirAsia, but boss of the low cost carrier Tony Fernandes does not see it as a setback for his group.

He said AirAsia Bhd would forge ahead and accelerate growth in the world's fourth largest populous country and that AirAsia Indonesia would be listed next year.

“Not at all, it is not a setback. The plans were set but we thought we could accelerate them (with the acquisition). (On hindsight) we think management time, the integration, the potential earnings fallout and the huge cash required to turna round Batavia would have been too dilutive,” he told StarBiz.

“We will carry on with our plans for organic growth and the potential of growth in that market is huge.”

Asked if he would look to acquire another airline to grow in scale and size to compete to tap the 260 million population, most of the whom have not travelled by air before, Fernandes said, “No, I don't think so.”

“It seemed like a bonus at the time and decided to go for it. We already have our mind set on all the things that we are doing in Asia, potentially setting up (joint ventures) in (South) Korea, Myanmar, India.

“With all that is happening, we are happy and do not want management to be bogged down as an acquisition of this nature can be very time consuming. We felt it is best to spend time doing other things,” he said.

On Wednesday, AirAsia and its Indonesian partner PT Fersindo Nusaperkasa dropped plans to buy domestic carrier Batavia Air as the three companies failed to reach an agreement.

“We will continue to seek strategic partners to develop our business,” Batavia Air chief executive director Yudiawan Tansari is believed to have said.

Fernandes said AirAsia would still maintain a close relationship with Batavia despite the failed deal.

AirAsia said in July that it planned to buy a 49 per cent stake in closely held Batavia Air, while Fersindo would buy the balance 51 per cent stake. The companies were expected to pay a total US$80 million (245 million ringgit) for Batavia Air.

From the onset, the deal faced hurdles such as regulatory issues.

“It was not going to be an easy transaction; it was like going against the grain of normal behaviour of growing organically.

“But we came out of this position feeling good and strong in Indonesia, and certainly are on the right track to accelerate growth in Indonesia with additional planes.

“We are confident of what we need to do to grow market share,” Fernandes said.

He continued that AirAsia “shareholders should be pleased that we did not rush through anything. We evaluated carefully. Timing was also not appropriate as it induced risks and was earnings dilutive.”

Separately, he said three initial public offerings (IPOs) had been planned for next year. Other than AirAsia Indoesia and AirAsia X, Tune Insurance will also be listed.

He would not say how much each company would raise but bankers are looking at $500 million (1.5 billion ringgit), of which 700 million ringgit will be raised by AirAsia X.

The listings are for the units to expand, as it is easier to raise capital in the capital markets.

“For AirAsia X, an IPO is the next step and we can expand quickly when it is public-listed rather than being private,” he said at a press conference earlier.

Asked if he would take Tune Group private, Fernandes said, “It is not for listing, but it is an interesting thought. It has a fantastic collection of inter-related companies, though it is not a conglomerate. Tune Group is all about low-cost businesses.

“It is logical and it has crossed my mind. Actually, I just sent an email out for them to look at the numbers, though I have many ideas (running through my mind all the time),” he said.

*US$1=3.06 ringgit

 

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