TONY TALKS MONEY: AIRASIA’S MONETIZATION PLAN

SHAH ALAM – The board of AirAsia Bhd is expected to decide on the sale of a stake in its leasing unit this week.

And if the board agrees to the proposed sale of the stake, it would mark the start of AirAsia’s quest to monetise its ancillary businesses related to its core airline business.

According to AirAsia group chief executive Tan Sri Tony Fernandes the board meeting will most likely decide on the proposal.

He also said that the proposed sale was part of a move to monetise the subsidiaries within the group because the market was not attaching a value to it.

“We realise that the stock market is not giving us any value for a lot of our subsidiary businesses. So we will be looking at monetising them over the next few years.

“Our stake in Expedia is very valuable. So is the loyalty card business and insurance. Either we see them as a core part of our earnings or we monetise them.

“It does not mean we will stop doing the business, they are very profitable, but we can use the cash for dividends or to reduce debts,” said Fernandes after the “Power Talks Business” series talk organised by The Star Media Group here.

The talk, which is seventh in the series this year, was attended by more than 450 people and held at the Management and Science University on Saturday.

Apart from the online travel website Expedia, the insurance and the loyalty card businesses, AirAsia has partnerships in the food business and also training.

The low-cost carrier’s core business includes passenger services and and cargo transportation.

On the leasing unit, Fernandes said it was one of the many investments that the low-cost airline was looking to divest but it had not been approved by the board.

He said that a board meeting would probably decide on the future direction of the leasing unit.

“The board will announce and then it will become clear,” he said.

There has been reports suggesting that AirAsia’s the leasing unit is valued by the airline at US$1.02bil.

AirAsia holds 100% equity in Asia Aviation Capital (AAC), which has 55 aircraft, but expected to expand to over 200 aircraft, and they included some of the latest A321 neos the airline had ordered recently.

Aircraft leasing business is booming and several companies in China and North Asia are looking to expand the business and the easiest way is to buy an existing outfit.

A report quoting sources said that AirAsia planned to tap potential suitors including the leasing units of China’s HNA Group, China Merchants Bank and Accipiter Holdings, the aviation leasing company backed by Hong Kong billionaire Li Ka-shing.

The interest in such leasing companies tied in with a growing trend among airline companies to lease part of their fleet instead of buying them all.

This move is said to be helping airlines improve their liquidity and their weighty balance sheets, a report said.

“We will wait until the board meets and we will announce it in the next few days,” he added. AAC’s main focus is acquiring aircraft and providing operating leases to AirAsia group affiliates such as Thai AirAsia, AirAsia India, Indonesia AirAsia and AirAsia Zest.

The company made its first deal outside the AirAsia group with Pakistan International Airlines Corp. Fernandes added that “we have been through 14 years of ups and downs but we believe the next two years could be very exciting times for AirAsia as a group from the passenger and ancillary income side.” – ANN