Budget carrier AirAsia has announced a tie-up with Malaysian Air which will help both airlines compete on long-haul routes with rivals such as Singapore Airlines. The deal will be in the form of a share swap. Malaysian Air will give AirAsia 20.5 per cent of its stock in exchange for a 10 per cent share in Asia’s number-one low-cost carrier.
The value of each bundle of shares is estimated to be around $360 million. The deal will be based on the closing price of the airlines’ stock on 5 August. AirAsia boss, Tony Fernandes will now join the board of Malaysian Air which will give his airline access to joint-purchasing agreements and reduced competition.
Both carriers will now work with each other to coordinate their cargo operations, establish new routes and purchase more planes. AirAsia recently confirmed an order with European planemaker Airbus for 200 brand new A320neos.
An increase in the number of tickets sold by AirAsia and income from additional services meant the airline was able to combat the rising price of jet fuel and double its profit, while net income for Malaysian Air declined by 55 per cent.
Khazanah Nasional, the largest investor in Malaysian Air, will retain a 49 per cent holding in the carrier. It is also looking into the possibility of taking a 10 per cent stake in AirAsia X. Meanwhile, AirAsia, which has operations in Indonesia and Thailand, is looking to expand in Vietnam, the Philippines and Japan. It currently carries passengers to more than 20 countries.