Tycoon Tony Fernandes’ Capital A to consolidate aviation business under AirAsia X

Capital A, controlled by Malaysian tycoons Tony Fernandes and Kamarudin Meranun, plans to consolidate its aviation business under the group’s long-haul unit AirAsia X as travel demand rebounds after the pandemic.

Under the plan, AirAsia Bhd and AirAsia Aviation Group will be merged into AirAsia X. Fernandes hopes the merger will strengthen AirAsia X, which in October was deemed a financially distressed company by Bursa Malaysia’s Practice Note 17 (PN17) after auditors Ernst & Young insured the airline’s continued serious doubts about the ability to operate.

“I have every confidence that we will soon be able to de-state PN17 without involving dilution of shareholder value, subject to the necessary approvals including Bursa Malaysia,” Fernandes said in a statement on Wednesday.

The plan, expected to be completed by July 2023, entails divesting Capital A’s stakes in AirAsia and AirAsia Air to AirAsia X in an all-stock transaction. The consideration shares to be issued by AirAsia X will then be distributed to A share holders.

Capital A, which is restructuring the group’s aviation business following AirAsia X’s recent turnaround, posted a net profit of 25 million ringgit ($5.5 million) in the three months to September, compared with a net loss of 652.5 million ringgit in the previous quarter.

“It is encouraging to see air travel continue to trend upwards in the final quarter of 2022 as the festive and school holidays approach,” Fernandez said. “It is also encouraging that China is also beginning to ease its domestic Covid restrictions, which may indicate Early signals of reopening will further boost air travel demand.”

The recovery in travel demand is also boosting Capital A’s digital businesses, such as its ride-hailing, delivery and fintech service Fernandes. While group revenue rose 34% to RM2 billion in the third quarter, it reported a net loss of RM1.1 billion, mainly due to one-off charges and unrealized foreign exchange losses. Excluding these charges, the operating loss was RM322 million.

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

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