AirAsia buys private jet used by its chairman and group CEO

Crystal Cruises, the World’s Most Awarded Luxury Cruise Line, officially unveiled a lavishly outfitted Bombardier Global Express XRS jet, which launches Crystal Luxury Air, at Shelter Terminal at Fort Lauderdale/Hollywood International Airport on Monday, March 14, 2016 in Fort Lauderdale, Fla. The new 12-seat aircraft will take off on April 3, 2016, offering private and travel leisure itineraries with a max flight range of 12 hours per leg. Mitchell Zachs/AP Images for Crystal Cruise

KUALA LUMPUR: AirAsia Bhd is buying for US$10mil (RM40.3mil) the private jet plane that has been used by its executive chairman Datuk Kamarudin Meranun and group chief executive officer Tan Sri Tony Fernandes since 2012.

In a statement to Bursa Malaysia on Tuesday, AirAsia said it had signed an agreement to buy the Bombardier BD-700-1A10 Global Express 9M-CJG from Caterhamjet Global Ltd (CJG), a Tune Group member.

This is considered a related party transaction as Kamaruddin and Fernandes are also directors and shareholders of CJG (with 18.56% indirect stake each).

CJG’s main business is providing private jet charter as well as the maintenance support for the aircraft.

CJG had purchased the Bombardier BD-700-1A10 Global Express for US$24mil (RM96.6mil) on July 6, 2012 and refurbished it for US$0.7mil (RM2.8mil) the subsequent year.

On April 1, 2015, AirAsia signed an agreement with CJG for the use of the CJG’s aircraft and the maintenance support for an annual fee of US$3mil (RM12.1mil) plus the goods and services tax (GST) till June 30, 2017. In return, CJG would ensure that the aircraft is available for usage at least 75 flight hours per month.

AirAsia also signed an agreement with Tune Group Sdn Bhd for the secondment of its personnel to Tune and reimbursement of staff costs to Tune until June 30, 2017. The personnel are three pilots, an engineer, a technician and two administrators for operating and maintaining the aircraft.

On the rationale for the purchase, AirAsia said CJG was planning to sell its aircraft and the loss of the aircraft would mean significant loss of productivity due to inefficient wait times, especially with the high volume and frequency of travel undertaken by Kamarudin and Fernandes.

AirAsia also noted that the current commercial agreement with Tune Group was not efficiently structured as AirAsia has to pay the salaries of the staff it seconded to Tune Group to operate Global Express, incurring GST in the process.

“Absorbing the staff would also allow them to be better utilised as they can be deployed to other operational functions within AirAsia and not just those associated with Global Express,” it said.

The carrier also pointed out that private jet prices in Asia had fallen over the past two years since the slowdown in the regional economy, making Global Express relatively cheap to acquire at present.