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Capital A Gets Set to Pull Its Airlines Into One Entity

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Skift Take

Two days ago, Tony Fernandes announced that he’s putting retirement aside for the next five years. On Thursday he announced AirAsia Move’s plans to be the biggest OTA in Southeast Asia and a day later, he’s talking about his ambition to position AirAsia as the largest low-cost airline group in Asia.

Capital A has announced an agreement for the divestment of its airline business and the acquisition of AirAsia X, forming a unified AirAsia Group.

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The acquisition, valued at approximately MYR6.8 billion ($1.4 billion), positions AirAsia as the largest low-cost airline group in Asia, according to Tony Fernandes, CEO of Capital A.

In December 2022, Fernandes had said that Capital A would be moving all the carriers under one existing structure, similar to how British Airways, Iberia Airline, and Aer Lingus operate under the International Airlines Group umbrella.

Back then, Fernandes announced that AirAsia X would undergo a name change to AirAsia Aviation Group, and six airlines would fall under its umbrella — AirAsia Malaysia, AirAsia Thailand, AirAsia Philippines, AirAsia Indonesia, AirAsia X Malaysia, and AirAsia X Thailand.

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The completion of the acquisition, expected by the end of September pending shareholder and court approvals, will result in the delisting of AirAsia X, with the new entity assuming its listing through a share swap.

Capital A said that it is slated to retain 18.39% of AirAsia Group’s expanded issued shares .

Narrow-Body Aircraft Operator

“We’ll always have some wide body, but we are principally going to be a narrowbody aircraft (operating airline), Fernandes said.

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He also said that a merger between Capital A’s sizable order book of 362 aircraft and AirAsia X’s diversified portfolio of traffic rights would be pivotal for continued expansion into new destinations and underserved routes.

“It’s the best of both worlds and the answer to our growth dilemma,” Fernandes wrote on social media.

He credited the new-generation Airbus aircraft for enabling the merger by offering increased range and efficiency.

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“The puzzle of bringing together all AirAsia airlines under a single umbrella had been on our minds for many years and the missing piece has finally arrived in the form of the new-generation Airbus aircraft,” Fernandes said.

The unified fleet aims to connect Southeast Asia to global destinations, including Europe, Africa, Central Asia, and North America, with the ability to access smaller airports and secondary cities, thereby reducing trip costs by 30% and simplifying operations.

Rival Global Giants

AirAsia CEO Bo Lingam will lead the new AirAsia Group as chief, with Fernandes assuming an advisory role. Lingam highlighted the simplification brought by eliminating the challenges associated with a mixed fleet.  

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“With extended 7- to 10-hour range capabilities and unparalleled fuel efficiency, these aircraft can fly further and more efficiently than previous narrowbodies, allowing us to explore new destinations and pioneering new and underserved routes, which has been the hallmark of AirAsia’s success,” Lingam said. “Our ambition is to rival global giants with a profitable, low-cost network spanning the globe.”

Benyamin Ismail, CEO of AirAsia X, highlighted the “Online Airline” strategy’s potential to leverage existing routes, approvals, and slots for rapid expansion.

On Wednesday, Fernandes, announced he will continue as CEO for another five years, putting aside retirement plans.

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“We have emerged out of the long tunnel called Covid, more resilient, refined and fortified. We have created five great companies– aviation, logistics, digital businesses, aviation services and IP business – all with enormous value and immense potential. I am confident they will evolve into the next AirAsia’s, embodying value and innovation,” he added.

AirAsia has also emerged as one of the bidders for Sri Lanka’s national carrier SriLankan Airlines, showcasing the airline’s interest in expanding in the South Asian region.

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