AirAsia, Malaysia Airlines form alliance through major share swap deal

AirAsia, AirAsia X and Malaysian Airline System announced they have entered into what is termed a Comprehensive Collaboration Framework, which includes a major share swap and a collaboration agreement to explore opportunities to cooperate on a broad range of areas.

Malaysia Airlines 777-200. Photo: By Rob Finlayson

The deal is the first major consolidation in the Southeast Asia region and creates a powerhouse that could set a model for further mergers and joint ventures. As part of the CCF, six MAS directors have resigned and have been replaced with six new directors, including AirAsia CEO and founder Tony Fernandes. Two MAS executives will join the AirAsia board.

According to AirAsia, under the CCF “all parties will work to complement each other’s businesses so as to leverage on their respective core competencies and optimize efficiency for the benefit of consumers.”

As part of the CCF, MAS and AirAsia are issuing free warrants to each other’s shareholders. A MAS shareholder will be granted approximately one warrant in AirAsia for every 30 MAS shares held, while an AirAsia shareholder will be granted approximately one MAS warrant for every 10 AirAsia shares held.

In addition, Tune Air and Khazanah Nasional Berhad, the major shareholders of AirAsia and MAS, respectively, have agreed to acquire from each other existing shares of both companies.

As a result, Tune will hold 20.5% of shares in MAS and Khazanah will hold 10% in AirAsia. In addition, Khazanah proposes to acquire 10% of shares in AirAsia X on terms and at a price to be mutually agreed upon later.

According to AirAsia, the agreement enables MAS, AirAsia and AirAsia X “to respectively focus on business segments in which they are capable of developing the most value.” The airlines will now assess and review their network services to enhance their offering, which will include partial interlining and flights to new destinations currently not served by any of the airlines.

The first phase of the collaboration will focus on “immediate synergy opportunities, which can be realized without significant effect on any party’s operations,” AirAsia said in a statement. The CCF will become effective immediately upon its execution and shall remain in force for five years, with an option for five more years.

AirAsia CEO and AirAsia X Director Tony Fernandes said in statement, “By focusing on core competencies, it will enable both parties to increase product offerings to our respective customers. AirAsia and AirAsia X see growth opportunities in new routes and destinations. Our business model requires us to continue to reduce prices in order to increase volumes for consumers in the low-cost travel segment, which we can now focus on in a more significant way.”

MAS Chairman Nor Yusof added, “The signing of the collaboration agreement heralds an exciting new era of cooperation whereby the airlines involved will stand to gain significantly by tapping the benefits of working together. We believe that the joint collaboration will help MAS focus on our strengths in our core markets and work towards deriving higher loads and more efficient resource utilization. We will also be able to offer services in engineering and other areas to both AirAsia and AirAsia X.”