Tony Fernandes’s global empire will eventually be broken up into one listed company in the US and four other companies listed in Southeast Asia, the Malaysian tycoon behind low-cost airline AirAsia said on Monday.

“We want to build four companies (for the non-aviation business), in the end they’ll probably be broken up. So shareholders of Capital A will own shares in aviation, will own shares in Teleport… we’ll list all of them separately, and one company will probably take over Capital A’s listing,” he told reporters on Monday at AirAsia Aviation 2024 Outlook briefing.

“So in the end, my dream is when I retire… five listed companies, one in America and four in other parts of Asean,” he explained, adding that he plans to retire in five years.

The non-aviation businesses he was referring to include logistics business Teleport, Move (online travel agency and fintech firm BigPay), airline engineering and maintenance services provider Asia Digital Engineering, food company Santan, aviation consulting firm AirAsia Consulting, AirAsia Academy, among others.

Fernandes was responding to TNGlobal’s query on his ultimate goal for its non-aviation and digital businesses after he announced the merger of airline businesses under Capital A with its sister company AirAsia X Bhd (AAX) at the briefing.

Formerly known as AirAsia Group Bhd, the Malaysia-listed aviation group was renamed Capital A in 2022 to reflect its broader portfolio.

On Monday, Fernandes announced that Capital A will sell its aviation business to long-haul unit AAX, in a bid to consolidate both long and short-haul operations under a single AirAsia brand.

“Eventually AirAsia X and AirAsia will be merged into one airline… my dream is for it to be one ASEAN airline,” he said, adding that AAX and AirAsia have started to fly each other’s routes.

The move is also part of the initiatives to lift the so-called Practice Note 17 (PN17) status for Capital A. Capital A and AAX were hit by pandemic travel restrictions and classified by Malaysia’s stock exchange as PN17, or financially distressed. Companies in such category may be delisted from the exchange if they fail to submit a regularization plan to stabilize their finances within a certain time frame. AAX was removed from the classification in November last year.

Capital A (AirAsia Group) has been actively building its super app and digital businesses when most of the group’s aircraft were grounded due to travel restrictions to contain the COVID-19 pandemic. The group has launched e-hailing service, AirAsia Ride in August 2021. In the same month, its logistics arm Teleport has acquired the food delivery platform Delivereat as it expands its food delivery business.

The group also announced the acquisition of Indonesian ride-hailing giant Gojek’s operations in Thailand for $50 million in July. Its FinTech unit BigPay has also formed a consortium and submitted its application for a digital banking license to the country’s central bank but the consortium was not granted the license.

According to the notes attached to Capital A’s latest financial results, Teleport posted a quarterly revenue of MYR188.9 million ($40.68 million) in the third quarter ended Sep 30, 2023. The logistics company recorded negative earnings before interest, taxes, depreciation, and amortization (EBITDA) of MYR3.7 million.

Its super app airasia Move’s revenue for the quarter was MYR171.4 million, EBITDA for the quarter was MYR11.7 million. Santan posted a quarterly revenue of MYR42.0 million, while its EBIDA stood at MYR10.2 million. BigPay posted revenue of MYR11.1 million, its EBITDA loss stood at MYR22.15 million.

Capital A reported a smaller net loss of MYR178.82 million for its third quarter, from net loss of MYR901.31 million in the corresponding quarter a year ago, as revenue more than doubled on continued improvement in its aviation business.
Group revenue for the quarter surged to MYR4.23 billion from MYR1.96 billion a year earlier.

In a research report on Tuesday, Kenanga Research said it is positive on this latest corporate development by Capital A which will form part of the proposed regularisation plan to lift it out of the PN17 status.

“Essentially, the exercise is expected to result in greater clarity of investment between Capital A, being the aviation services and digital businesses provider, and AAX, a pure aviation business consolidating both long and short haul routes under the AirAsia brand name,” analyst Raymond Choo wrote in the research note.

This would result in the development of a more focused shareholder base, which is also expected to facilitate a business-centric valuation of the separate entities and potentially unlock value to shareholders, he added.

Capital A International’s SPAC-listing targeted in June-July

Commenting on the updates for Capital A’s plan to list its brand management unit on the NASDAQ stock exchange, Fernandes said the company will appoint advisors soon.

“In the next week, we’ll be appointing all the advisors and then working towards a business combination. I hope [it will be completed in] June- July. We can’t control as it depends on the American regulators etc. Our target is June-July,” he said.

Capital A announced in November last year that it has entered into a Letter of Intent (LOI) with Aetherium Acquisition Corp, a Special Purpose Acquisition Company (SPAC) listed on the NASDAQ, for a proposed business combination merger with Capital A International, to be incorporated.

The proposed business combination would result in Capital A International, a new investment and strategic development company that leverages the “AirAsia” brand and capitalizes on core capabilities in aviation, travel and hospitality and digital technologies, becoming a standalone publicly traded company in the US.

The proposed business combination will be at an indicative equity value of $1 billion based on an independent valuation of the AirAsia Brand.

AirAsia, which Fernandes acquired from Malaysia government in 2001 for less than $1 has turned into Asia’s largest low-cost carrier over the years.

AAX was launched in 2007 with ambitions to operate long-haul flights, including to Europe. AirAsia X, however, later suspended flights to London and Paris in 2012 due to rising costs. AAX shifted focus to markets like Australia, Japan and China.

AirAsia X takes over Capital A’s aviation business