Navigating a ‘perfect positive storm’

FOR all the lockdown-induced troubles it has endured over the past three years, and at the same time bracing for a global recession that may be inevitable next year, Capital A Bhd is keeping a resilient and bullish outlook heading into 2023.

The group – which changed its name from AirAsia Group Bhd in January – has detailed a number of innovative strategies to improve its profitability and shareholder value, including lifting itself and sister company AirAsia X (AAX) from their current Practice Note 17 (PN17) status.

Earlier this week, Capital A has confirmed its plans to dispose of and subsequent merging AirAsia with AAX in return for AAX shares, as part of its and AAX’s PN17 exit plans.

However, chief executive Tan Sri Tony Fernandes is already looking beyond resolving the PN17 matter, telling StarBizWeek – and his team at Capital A – that he is aiming to “grow again.”

Fernandes lists a number of reasons for his optimism, which he calls the “perfect positive storm”.

“First of all, while I think a recession is definitely on its way next year, we believe that people will still travel, and they would cut shopping for clothes before they stop travelling.

“Secondly, if we are to save money travelling, we might as well save it with a low-cost carrier. And thirdly, with the weakening of the ringgit in past few years, it is better to travel within Asia than to go to, say, the United States,” he says.

Aside from these reasons, the price of oil receding to about US$80 (RM352) per barrel currently from its high of around US$120 (RM527) per barrel during the onset of the Russia-Ukraine conflict, coupled with the strengthening of the ringgit against the greenback, are also factors that Fernandes is upbeat about next year.

“In a weird way, we could become beneficiaries of the likely recession. We have endured many headwinds in recent times,” he predicts.

Moving the focus away from the flying, in tandem with the proposed transfer of AirAsia to AAX, Fernandes is leaving the aviation services, digital and logistics venture of the group with Capital A, and on top of seeing how the ventures could share resources and work better together, he also has listing plans for them.

The aviation services segment of Capital A include Asia Digital Engineering (ADE) Sdn Bhd that provides a comprehensive suite of maintenance, repair and overhaul (MRO) services, Ground Team Red Sdn Bhd which is focused on ground handling and in-flight caterer Santan Food Sdn Bhd. Additionally, the group is represented in the logistics sphere by Teleport Commerce Malaysia Sdn Bhd (Teleport), while the airasia Super App and Bigpay are its digital ventures.

Fernandes intends to list the mini-conglomerate of aviation services providers under the name Red Aviation Services by July of 2023, and perhaps also in Singapore.

“Our investors will have choice and clarity about which segment of our businesses they would like to invest in – aviation services, digital, or logistics, but I see massive value in all of the ventures,” he explains.

Fernandes says Malaysia has always played second fiddle to Singapore Airlines in MRO services until the arrival of AirAsia, and with an effective cost structure as well as a guaranteed fleet of 200 aircraft from AirAsia, he is confident that ADE will become one of the most efficient MRO service providers in the world.

“With that experience and the know-how of saving money, we believe many other airlines would come to us to repair and service their planes,” he notes.

Envisioning how all the ventures could work together on shared resources for better efficiency and competitiveness, he spells out strategic steps to take the group forward, with the world continuing to move ahead post-lockdowns.

“For example, what we did with AirAsia was we created many new routes that allowed our customers to go ‘direct’, or point-to-point. In eCommerce, customers would want the same thing as that allows them to deliver and receive their products quickly.

“Because AirAsia and AAX have many flights to many destinations all over the world, there is no reason why our Teleport in logistics could not compete with DHL or FedEx, especially in this region.

“The idea is we would be able to deliver faster and cheaper,” he says, adding that this could even smoothen the path for potential home-based startups to tap into the regional or even the global market instead of being confined to Malaysia.

On the two digital enterprises, the airasia Super App and BigPay, Fernandes says not only can customers book travel and shopping plans with AirAsia and AAX, but he suggests that customers could also obtain travel loans by harnessing the synergy between the two applications.

While being buoyant about the prospect that all the ventures could be utilising one grand ecosystem – with Teleport delivering cargo on AirAsia and AAX for instance, or ADE servicing AirAsia and AAX planes long term – Fernandes does not see them recombining under one group at any time in the future.

“I’ve found that investors prefer things to be simple. So with AirAsia merging with AAX we have an airline group, but we won’t have a massive structure that gets complicated. They would also be easily manageable and costs would be better rationalised,” he explains.

Hence, beginning with the proposed transfer of AirAsia to AAX, as with the hope that AAX would be fully flying all of its 211 aircraft in the second quarter of 2023, Fernandes reiterates his confidence that the synergy would give the potentially independent and respective ventures of Capital A wings for flight.

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