Capital A chief executive officer and AirAsia founder Tan Sri Tony Fernandes.
KUALA LUMPUR: Capital A Bhd
has cleared a key hurdle to be lifted out of its Practice Note 17 (PN17) status by the end of this year.
This is following all conditions required for the disposal of its airline business to its sister company AirAsia X Bhd (AAX) having now been met and the sale and purchase agreements with AAX having turned unconditional.
This marks the final chapter in the consolidation of all AirAsia’s airline businesses under a single airline group, and the start of the next journey for Capital A as a multi-platform travel and digital group.
This milestone also comes after the fulfillment of all outstanding requirements; all stakeholder consent letters and the RM1bil private placement commitment letters for AAX having been secured.
Also on Oct 17, a major hurdle relating to a regulatory exemption required from Thailand had been resolved, the company said.
Once this is completed, Capital A will see it focus on the non-aviation business while still holding its existing 18% stake in AAX.
Both Capital A and AAX will remain publicly listed companies, while the latter will eventually be renamed as AirAsia Group.
“It has been almost six years since Covid-19 started. It doesn’t feel that long ago, but it has been that long since the pandemic.
“Nothing was easy for us – everything was really tough – in the sense that we didn’t only face Covid-19 but the PN17 status which was probably as bad as the pandemic in a sense. This is because it took so much of the management’s time,” Capital A chief executive officer and AirAsia founder Tan Sri Tony Fernandes said in his speech when announcing the corporate milestone yesterday.
“This is really like the final chapter of Covid-19, of which the effects of it has lasted longer than anticipated prolonged by the PN17 status.
“On April 26, 2024 we announced the approval from Capital A and AAX’s board to sell AirAsia to AAX – it has taken us a (lengthy) year and a half to sell the airline.
“We initially thought it would only take a couple of weeks to get it done, but instead it took us 18 months to sell it. And so, this is our final chapter of this restructuring process,” Fernandes added.
He noted it was possible for this to be completed earlier than the December 2025 targeted deadline.
“The airline group, which will be called AirAsia Group, will bring together all seven AirAsia airlines – medium and short haul – under one platform to operate as one network across the region, while Capital A will focus on expanding its five high-potential, high-growth travel and digital companies,” Fernandes said.
When the airline consolidation is completed, AirAsia Group will run as one operation with a strategy built around multiple key megahubs across the region rather than relying on a single home market, it said.
The vision now set out by its management is to be the world’s first narrow-body low-cost network carrier.
This will improve connectivity for guests, optimise aircraft utilisation, lower unit costs and create room for new growth with a focus on narrow-body planes, including the Airbus A321neo and the longer-range A321XLR aircraft, it added.
Fernandes in his presentation said the AirAsia Group also had plans to eventually establish a global network of its brand name by building additional hubs in the Middle East and Europe.
This would allow it to build network, which will enable its passengers to reach various continents via each hub.
“We are going out of survival mode and are now focused on growing this airline. The aim is to have this airline fly all over the world eventually,” he said.
Fernandes also said in his speech that he hoped to reach a higher level of profitability for the airline eventually.
“We’re using a lot of artificial intelligence or AI and data.
“I think we’re going to have a very profitable airline – my goal before I retire is for the airline to get to the Emirates’ earnings before interest, taxes, depreciation and amortisation or Ebitda margins of 30%.
“I really think we can do this. We are also very close to finalising our large aircraft order – this is how confident we are moving forward,” he said.
Meanwhile, Capital A will house these companies: Asia Digital Engineering or ADE, Teleport (logistics), AirAsia MOVE (travel platform), Santan (food and beverage business), and its brand licensing and IP business, Abc, which will be renamed to AirAsia NEXT.
Meanwhile, Bloomberg reported sources as saying that the AirAsia Aviation Group plans to raise as much as US$600mil (RM2.5bil) to replace a private credit facility with a lower-interest bearing bond.
It is targeting a coupon rate of below 10% for the proposed note, as it would like to take advantage of the improved travel numbers to get cheaper refinancing rates, the report said.
AirAsia is holding non-deal investor meetings in Hong Kong on Nov 18 and in Singapore on Nov 21, its deputy chief executive officer Farouk Kamal told the business wire in an email reply. Farouk said its strong earnings performance despite a challenging environment has generated significant investor interest and demand.
“Since we’re coming out of this PN17 situation, the financial markets have been very, very positive on the AirAsia Group and Capital A. It was tough before this, but now many are very interested to fund us and refinancing the business going forward. In the roadshows, the number of people that have come to the meetings are very encouraging,” Fernandes said.
