MAS, AA to collaborate on procurement, repairs
KUALA LUMPUR, May 2 — Malaysia Airlines (MAS) and AirAsia have announced plans to explore joint cost-savings exercises in the wake of the collapse of their controversial share swap today.
The two airlines said in separate statements this evening that they have entered into a Supplemental Collaboration Agreement (SA) that covers procurement, aircraft component repairs, training and technical and operational efficiency.
They would also jointly champion common issues affecting the industry.
AirAsia said that the SA will focus on specific areas of collaboration while continuing to comply with all relevant anti-trust laws.
AirAsia Group Chief Executive Officer Tan Sri Tony Fernandes said that the SA was a culmination of the hard work put in by the parties over the last eight months.
“We are very excited with this latest development that we can now have a clear focus on developing the ASEAN and now Asian low-cost carrier market which has enormous growth potential,” he said.
Procurement initiatives between the airlines are expected to lead to efficiencies by exploring the potential of outsourcing their procurement activities to a mutually owned joint-venture company.
Key areas in procurement to be explored could include high-spend items such as fuel, insurance, IT and communications.
“We are very conscious of the increasingly more competitive environment, given ASEAN Open Skies, and have been heartened by the meeting of minds between the three airlines in progressing the collaboration efforts which will set us in good stead for the future,” said Fernandes.
MAS Group Chief Executive Officer Ahmad Jauhari Yahya said that his main priority now was to strengthen the airline’s balance sheet and operations through improved productivity, increasing revenue and lowering costs.
“Collaboration is a game-changer in our Business Plan to build a sustainable business for the future,” he said. “We will continue to drive these collaborations with AirAsia and AirAsia X as it will enable MAS to exploit potential synergies and efficiency gains. It is important to find all ways to do our business more efficiently and with lower costs.”
The controversial share-swap deal between MAS and AirAsia was cancelled as it had become an impediment to the recovery efforts of the loss-making flag carrier, state asset manager Khazanah Nasional said today.
The announcement came after weeks of speculation that the deal would be called off following fierce internal resistance from MAS employee unions and associations.
The unwinding of the share swap will see Khazanah transfer its 10 per cent, or 277,650,600 ordinary shares, in AirAsia back to Tune Air, while Tune Air will transfer its 20.5 per cent, or 685,142,000 ordinary shares, in MAS back to Khazanah.
The transaction will be cashless and conducted based on the same swap ratio of 2.05 based on the prices at the time the share swap was announced in August 2011, where MAS was valued at RM1.60 per share and AirAsia’s share at RM3.95.
Khazanah also said that the nominee director of Khazanah on AirAsia’s Board of Directors and Tune Air’s nominee directors on MAS’ Board would resign immediately.
Khazanah and Tune Air agreed to the share swap last August, after four previous unsuccessful attempts to forge an alliance between MAS and AirAsia, which soared from a decade ago when Fernandes and partners bought the two-aircraft operation and its debts for just RM1.
Khazanah’s CIMB Bank advised both parties in the deal, which was seen as the final attempt to save MAS despite an earlier rescue programme in 2001 planned by advisory firm BinaFikir Sdn Bhd.
Following the share swap, the management team led by new managing director Ahmad Jauhari Yahya put together a business turnaround plan last December to help propel MAS back to profitability.
The new management’s efforts to restructure the airline and put it in a more competitive position, however, caused friction with unions and employee associations.