Fernandes pushes One AirAsia plan a step further

PARIS, France — AirAsia Group Chief Executive Officer Tony Fernandes is hoping its Philippine unit will be able to conduct an initial public offering (IPO) this year, in preparation for the group’s plan to consolidate its Southeast Asian units under one listed holding company.

“Our first step is to list Philippines and Indonesia for my One AirAsia plan, where we have all the AirAsia units go public. Malaysia and Thailand are public. Not sure which one will come first, Philippines or Indonesia, but both are going to go public very soon,” he said in a press briefing at the sidelines of the International Paris Air Show in Le Bourget airport on Tuesday afternoon.

Under the One AirAsia plan, Mr. Fernandes said he wants to form an ASEAN (Association of Southeast Asian Nations) community airline by combining its units in Malaysia, Thailand, Philippines and Indonesia under a single holding company. The move is expected to yield economies of scale and help AirAsia establish a dominant position in markets where it operates.

“We’re now pushing ASEAN governments to say we want to invest more in ASEAN and all these old-fashioned rules that say we can only own 49% needs to be looked at, and the time is right that ASEAN is taking a greater step forward,” he said.

“What we’d like to do is create one holding company and all our Indonesian, Thai, Malaysian and Philippine shareholders can swap their equity in individual airlines into a holding company that can own 100% of all the airlines. This would enable us to invest more, to reduce costs and to be much more efficient in our operations.”

Mr. Fernandes said he sees the holding company becoming the first “truly ASEAN stock,” although he declined to give a timetable for the planned listing.

At the same time, the AirAsia founder admitted the plan would require the fiat of individual ASEAN governments.

“I have to talk to the different leaders of ASEAN about that… We have to see how the political systems work. But I’m talking about it publicly so I’m optimistic,” Mr. Fernandes said.

IPO THIS YEAR

For Philippines AirAsia, Mr. Fernandes said he is hopeful the IPO would push through this year.

“It’s the best year (for Philippines Air Asia) and we’re heading towards our IPO. I think a bit of a management turnaround, better aircraft, understanding the market better, all those things have added,” he told visiting Manilabased reporters at the sidelines of the Skytrax World Airline Awards here.

Asked for the timeline for the Philippine unit’s IPO, he replied, “hopefully this year.”

The AirAsia Group in May reported that the Philippine unit posted an operating profit of P400 million in the first quarter of 2017, as passenger count rose 19% and revenues surged 41%. The accounts of the Philippines, as well as Indonesia, were consolidated into the AirAsia group during the reporting period.

In a separate interview, Philippines AirAsia chief executive officer Dexter M. Comendador attributed the budget carrier’s bestever first quarter performance to lower costs, and increased ancillary revenue.

“We’re able to lower our costs and tumaas talaga ang aming load factor and ancillary like food, baggage, duty-free and cargo,” he said.

Mr. Comendador noted the load factor for Philippines AirAsia reached 90% in the first quarter, with the increasing popularity of its domestic destinations.

Mr. Fernandes is optimistic on the AirAsia Group’s prospects for the rest of the year, despite reporting a 30% profit drop in the first quarter.

“We think we’re in the best position ever for AirAsia. The crazy competition has gone out. In most countries, there’s either one or two airlines that are full service and low-cost. Oil is now fairly stable… Plus we’re in Asia, we’re in the best part of the world,” he said.

Asia’s largest budget airline posted a 29.8% lower profit to RM615.81 million in the first three months of 2017, mainly due to higher fuel costs.

AirAsia also expects strong demand for cheap travel to continue this year, and plans to order 29 new planes this year.

“I dare say we’ll add about 3040 planes a year, taking us up to the magic number of 100 million passengers by 2021,” Mr. Fernandes said.

However, long-haul budget affiliate AirAsiaX’s plans to launch flights to Europe and the United States have been shelved.

Mr. Fernandes said AirAsiaX sees more potential in developing routes between secondary and tertiary cities in Asia, than venturing in the highly competitive European market.

“We think that rather than waste our time in Europe, at the moment, we can develop these secondary and tertiary cities… Adelaide, Nagoya are more important for me than flying to Europe. That’s our strategy.”