Tycoon Tony Fernandes’ capital to consolidate airline business under AirAsia X Amid travel recovery

Capital A – controlled by Malaysian tycoons Tony Fernandes and Kamarudin Meranun – plans to consolidate its airline operations under the group’s long-haul subsidiary AirAsia X amid a recovery in post-pandemic travel demand.

Under the plan, AirAsia Bhd and AirAsia Aviation Group will merge into AirAsia X. Fernandes hopes the combination will strengthen AirAsia X, which in October was deemed a financially distressed company under its Practice Note 17 (PN17) Bursa Malaysia, according to the cast of the auditor Ernst & Young significant doubt about the ability of the airline to continue as an active activity.

“I am fully confident that we will soon be able to wind down the PN17 regime without entailing a reduction in shareholder value, subject to the necessary approvals, including from Bursa Malaysia,” Fernandes said in a statement on Wednesday.

The plan, which is expected to be completed in July 2023, involves the divestment of Capital A’s stake 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 the shareholders of Capital A.

Capital A is revamping the group’s airline business as AirAsia X returned to the black recently, posting a net profit of 25 million ringgit ($5.5 million) in the quarter ended September, compared with a net loss of 652.5 million ringgit the year before Semester.

“It is encouraging to see a continued upward trend in air travel in the last quarter of 2022 with the festive season and school holidays approaching,” Fernandez said. “Also, encouragingly, China has also begun to relax its domestic Covid restrictions, which may indicate early signs of a reopening that will further boost air travel demand.”

The resurgence in demand for travel is also boosting Capital A’s digital businesses, such as transportation, delivery and fintech services, Fernandes said. While the group’s revenue rose 34% to 2 billion ringgit in the third quarter, it reported a net loss of 1.1 billion due mainly to one-off charges and unrealized foreign exchange losses. Excluding such charges, the operating loss was 322 million ringgit.

Fernandes and Kamarudin took over AirAsia in 2001 to build a low-cost carrier that would make air travel affordable. The partners dropped out of last year’s ranking of Malaysia’s 50 richest people.

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