Malaysia-based budget airline AirAsia X (AAX) is expected to complete the acquisition of Capital A Berhad’s aviation business for MYR 6.8 billion ($1.49 billion) by the end of this year.
AAX said in a statement on Thursday that it has submitted the listing application and the draft circular to Bursa Malaysia Securities Berhad, which details its proposed acquisitions of Capital A’s entire equity interest in AirAsia Aviation Group Limited (AAAGL) and AirAsia Berhad (AAB).
In an effort to expedite the process, AAX had also announced the cessation of the proposed internal reorganization, and to undertake the proposed acquisitions under AAX directly.
The completion of the proposed acquisitions is set to be by end of this year, establishing an enlarged aviation group under the AirAsia brand, and signifying a new era for the aviation giant, said the statement.
With the proposed acquisitions, it said AAX shareholders gain the opportunity to access Capital A’s aviation business valued at MYR 6.8 billion ($1.49 billion) through an MYR 3 billion ($656 million) new shares issuance.
This investment grants them ownership in a mature and ongoing airline business operation, comprising six established airlines and a newly established airline in Cambodia that collectively form ASEAN’s most extensive short- and medium-haul network, consolidating AirAsia’s position as the largest low-cost carrier in ASEAN, it added.
“As we enter the next phase of the proposed acquisitions, this strategic move is set to strengthen our market position and streamline AirAsia operations across the region,” said AirAsia X Chairman Fam Lee Ee.
According to him, by integrating AirAsia Aviation Group’s extensive network and resources with AAX’s medium-haul capabilities, they aim to create a more cohesive and efficient airline group.
He noted the synergistic benefits will not only enhance our operational and cost efficiencies but also provide a seamless travel experience for their guests as regional travel demand continues to grow.
Furthermore, he opined that their shareholders stand to benefit significantly from this acquisition.
“The enlarged entity is expected to deliver improved financial performance, with increased revenue streams and cost savings from integrated operations,
“By ceasing the proposed internal reorganization, we are intent on our commitment to accelerate this acquisition and realizing its benefits as swiftly as possible,” he added.
He also noted they anticipate that an enlarged aviation group will attract strong interest from investors, given their enhanced market position and the growth potential the combined aircraft orderbook presents for their expansion ambitions.
“This move aligns with our long-term vision of becoming a leading player in the global aviation industry,” he said.
In a separate statement, Capital A said it has submitted its extraordinary general meeting (EGM) circular to Bursa Malaysia, that details the proposed disposals of its entire equity interest in AAAGL and AAB to AAX .
An extraordinary general meeting (EGM) for shareholders to approve the Proposed Disposals will be convened in 21 days from the date of the issuance of the circular at a later date, said the firm.
According to the statement, this pivotal move is a major step to bring Capital A closer in its effort to regularize its financial position and is part of Capital A’s strategic plan to streamline its operations and concentrate on specialized areas supplementary to the aviation business.
Capital A aims to complete the proposed disposals by December, heralding a new era for the new aviation group under AAX as well Capital A Group’s aviation services and digital businesses.
“The ongoing transformation of the new aviation group is a testament to Capital A’s resilience and strategic foresight,
“It will not only redefine the aviation landscape but deliver unparalleled value to its shareholders, who will receive AAX shares upon the completion of the proposals,” Capital A Chief Executive Officer Tony Fernandes said.
According to him, this will ensure their continued participation and benefit from the aviation business’s potential prospects, while providing greater investment clarity between Capital A and AAX, allowing the capital market and investors to better see the potential and prospects of each entity.
Bo Lingam, Chief Executive Officer of AAAGL, said their strong ancillary revenue model and strategic financial initiatives have positioned them to emerge stronger than ever as they look forward to fully reactivating all their aircraft by end of this year and await an exciting 2025.
He noted this remarkable turnaround will be supported by a valuable order book and a versatile fleet of Airbus A321LR (long range) and A321XLR (extra long range) aircraft.
“By 2025, our goal is to surpass pre-Covid performance levels and continue our path of growth and innovation,
“We expect our fleet to grow from the current 221 to over 300 aircraft in the next five years, carrying more than 100 million guests annually,” he added.
Financially, based on the pro forma effect of the proposed disposals, the shareholders fund of Capital A will turn to positive from a negative of MYR 8.8 billion ($1.93 billion) as of December 31, 2023, setting the first milestone to improve its financial position, bringing the company closer to exiting from PN17.
Additionally, Capital A has made substantial progress in equity and debt-raising efforts, which is expected to be announced in due course.
The remaining business of Capital A will continue to contribute positive results to the group.