1 December 2022
Capital A — controlled by Malaysian tycoons Tony Fernandes and Kamarudin Meranun — plans to consolidate its aviation business under the group’s long-haul subsidiary AirAsia X amid a post-pandemic recovery in travel demand.
Under the plan, AirAsia Bhd and AirAsia Aviation Group will be merged into AirAsia X. Fernandes hopes the merger will strengthen AirAsia X, which was classified as a financially troubled company under Bursa Malaysia’s Practice Note 17 (PN17) in October after auditors Ernst & Young cast serious doubts about the airline’s ability to continue as a going concern.
“I have every confidence that we will soon be able to remove PN17 status without diluting shareholder value, subject to necessary approvals including from Bursa Malaysia,” Fernandes said in a statement on Wednesday.
The plan, which is expected to be completed in July 2023, will see the sale of Capital A’s interests in AirAsia and AirAsia Aviation to AirAsia X in an all-share deal. The consideration shares to be issued by AirAsia X will then be distributed to Capital A shareholders.
Capital A is revamping the group’s aviation business as AirAsia X recently returned to profitability with a net profit of 25 million ringgit (US$5.5 million) for the three months to September compared to a net loss of 652.5 million ringgit in the previous quarter.
“It is encouraging to see a steady upward trend for air travel in the final quarter of 2022 as the bank holidays and school vacations approach,” Fernandez said. “Also encouraging is that China has also started to ease its domestic Covid restrictions, which may indicate early signs of a reopening that will further fuel demand for air travel.”
The revival in travel demand is also boosting Capital A’s digital businesses, such as B. the driving, delivery and fintech services Fernandes. While group revenue rose 34% to Ringgit 2 billion in the third quarter, it posted a net loss of Ringgit 1.1 billion, mainly due to one-time charges and unrealized foreign exchange losses. Excluding these charges, the operating loss was 322 million ringgit.
Fernandes and Kamarudin acquired AirAsia in 2001 to build a low-cost airline that would make air travel affordable. The partners fell out of last year’s ranking of Malaysia’s 50 richest people.
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