Posted on: 08 August 2011 by Ross McSweeny
Malaysian Airline System, AirAsia and AirAsia X have announced a Comprehensive Collaboration Framework (CCF) under which all parties will strive to complement each other’s businesses so as to build on each one’s respective core competencies and optimise efficiency for the benefit of consumers.
To establish a mutuality of interest, MAS and AirAsia are issuing free warrants to each other’s shareholders. Independent advisors will be appointed to advise minority shareholders on the proposed warrants. A MAS shareholder will be granted approximately one warrant in AirAsia for every 30 MAS shares held. 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% of shares in AirAsia. Khazanah will continue to be the single largest and major shareholder of MAS. In addition, Khazanah proposes to acquire 10% of shares in AirAsia X on terms and at a price to be mutually agreed later.
The collaboration agreement enables MAS, AirAsia and AirAsia X to focus on the respective business segments in which they are capable of developing the most value. The parties will assess and review their network services to enhance their offering of services and customer experience. This will include partial interlining and flights to new destinations currently not served by any of the airlines.
The early phase of collaboration will focus on immediate synergy opportunities that can be realised without significant effect on any party’s operations. This means the companies will potentially be able to realise savings and increase revenues in the areas of aircraft purchasing, engineering, ground support services, cargo services, catering and training.
The agreement envisages more detailed terms of collaboration following completion of a full anti-trust review by all three companies.The collaboration agreement will come into effect immediately upon its execution, and will remain in effect for five years from the date of the agreement with an option for a further five-year renewal.
In addition, a Joint Collaboration Committee (JCC) has been formed to implement the Collaboration Agreement which will be chaired by MAS board member Datuk Mohamed Azman Yahya with other members including MAS executive director Mohammed Rashdan Mohd Yusof, AirAsia Group chief executive officer Tan Sri Tony Fernandes and AirAsia deputy Group CEO Dato’ Kamarudin Meranun.
MAS chairman Tan Sri Md Nor Yusof commented, “The signing of the collaboration agreement heralds an exciting new era of co-operation 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 utilisation. We will also be able to offer services in engineering and other areas to both AirAsia and AirAsia X. Firefly’s resources would be refocused to launch a new regional full service airline operation.”
AirAsia chief executive officer and AirAsia X director, Tony Fernandes, added, “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.”
An advisory panel, chaired by Tun Abdullah Hj Ahmad Badawi, has also been set up to ensure that all parties involved in the CCF, operate in the interests of the public and reflects the aspirations of all consumers.