Saturday, January 06, 2007

AirAsia in talks on 20% stake in FAX

KUALA LUMPUR: AirAsia Bhd is in discussions for a 20% stake in Fly Asian Xpress Sdn Bhd (FAX), which is slated to launch a long-haul budget airline in July.

The offer, with an option of a further 10% had been tabled to AirAsia, said FAX chairman Datuk Kamarudin Meranun.

“AirAsia does not own a stake (in FAX) now,” Kamarudin, who is also AirAsia deputy chief executive officer, told a media conference yesterday after the launch of FAX's new product, AirAsia X.

FAX currently operates the rural air services in Sabah and Sarawak. Its stakeholders are AirAsia CEO Datuk Tony Fernandes (50%), Kamarudin (30%) and FAX CEO Raja Mohd Azmi Raja Razali (20%).

Kamarudin said an offer had been made to AirAsia and the company's board, excluding Fernandes and himself, would decide on the matter.

At the launch, FAX signed a memorandum of understanding (MoU) with AirAsia, which would allow the latter to franchise its internationally recognised brand to FAX.In terms of aircraft fleet, AirAsia X is finalising its requirement and aircraft under consideration include Boeing 777-300ER and Airbus 330-300.

AirAsia X will start operations with two or three aircraft and increase the fleet over the next five years.

Fernandes said AirAsia X would order 20 new aircraft.

“It will be a one-type aircraft; the selection has been narrowed to Boeing or Airbus. We will announce the purchase plan by end-January,” he said, adding that the purchase would be funded with shareholders' funds.

FAX expects to carry half a million passengers in the first year of operations.
Meanwhile, a bank-backed brokerage analyst contacted by StarBiz felt that it would not be a good move for AirAsia to acquire a stake in FAX.

“It is an option for AirAsia but the market will be cautious about this move. The business model for long-haul budget carrier is not proven. The risk profile of AirAsia may change,” he said.

The analyst said the airline business had high risk and that starting a short-haul budget carrier may not necessarily be good.

“The general feeling is that the long-haul budget carrier is a risky move and it was good that it was undertaken by FAX,” he said.

An analyst from HLG Securities Sdn Bhd also viewed the long-haul budget carrier business model as risky and believed that AirAsia should continue to focus on its current short-haul business model.

“We think that taking up a stake in FAX at such an early stage does limit its investment risk.

“Our neutral view is premised on FAX maintaining a prudent business model of leasing its planes initially until it registers a steady profitability track record, whereby it can then finance the purchase of its planes independently,” the analyst said.

On another note, AirAsia plans to increase its Airbus A320 fleet to 200.

Kamarudin said AirAsia had firm orders for 100 Airbus aircraft, with an option for 30 more. He expected the company to finalise the expansion of its fleet by end of the month.

Source : STAR
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