AirAsia, Batavia Air Choose Alliance Over Acquisition
AirAsia, Asia’s biggest low-cost carrier, is thinking about setting up a joint venture in the areas of ground handling, distribution and pilot training with Indonesia’s Batavia Air after an acquisition plan involving the two companies was scrapped.
AirAsia said that the company “realigned” its proposed Rp 750 billion ($78 million) acquisition of Metro Batavia, operator of Batavia Air after considering that “the precise scale of integration, which includes including a re-fleeting as well as streamlining a blending of cultures was expected to take up considerable time and effort,” the Sepang-based, Malaysia company said in a statement on Monday.
Based on the share sale agreement signed in July, AirAsia was to buy 49 percent stake of Batavia while its local partner, Fersindo Nusaperkasa, would acquire the majority 51 percent.
Now, instead of there being an acquisition, which would have included its Aero Flyer Institute, Batavia and AirAsia will form an alliance encompassing ground handling, distribution and inventory systems.
Batavia and AirAsia Indonesia — of which AirAsia controls 49 percent — will form a separate joint venture on a pilot training center. No details have been provided on the new alliance.
The new agreement is expected to deliver many of the intended benefits of an acquisition and AirAsia, Fersindo and Metro Batavia Group are unanimously aligned to deliver the identified operational alliances, the statement said.
“We always knew it was not going to be an easy transaction,” Tony Fernandes, the group chief executive of AirAsia said in a statement. “Our aggressive focus in Indonesia remains and we will push our Indonesian IPO plans while still maintaining a close cooperation with Batavia Air.”
“As an Indonesian company, our interest was to find the best solution for all parties, including the Indonesian consumer. The acquisition at this time would not have achieved these objectives. We continue to be fully supportive of AirAsia’s growth in Indonesia,” added Muhamad Riza Chalid, a stakeholder at Fersindo.
Dharmadi, CEO of AirAsia Indonesia, said that the company will forge ahead with its expansion plans in the country by accelerating its fleet expansion.
“We are looking to more than triple our fleet size in the next five years to accommodate an average annual passenger growth rate of 24 and 28 percent, respectively, in international and domestic markets,” he said in a statement.
AirAsia Indonesia currently operates 18 aircraft.
Fernandes said the group had ordered as many as 400 more aircraft this year but refused to say how many will be allocated to Indonesia’s operation.