‘The Beginning of a New Era’ Capital A and AirAsia Group sign a conditional sale and purchase agreement on the divestment of Capital A’s airline business
Total consideration for Capital A’s disposal and correspondingly, AirAsia Group’s acquisition amounting to RM6.8 billion, to be fulfilled with shares and debt settlement
Capital A’s shareholders’ equity to turn positive for the first time in 14 quarters following the divestment, while AirAsia X's shareholders’ equity to also strengthen post-transaction
AirAsia Group to fortify its position as the largest low cost carrier in Asia, with a win-win “One Airline” strategy set to transform the face of global low cost travel
AirAsia Group’s ultimate vision to create a global network airline based on the robust narrowbody fleet with enhanced operational efficiency and extended range capabilities to lower cost
KUALA LUMPUR, 26 April, 2024 - Capital A Berhad (“Capital A”) and AirAsia Group Sdn Bhd (“AirAsia Group”), the newly incorporated entity that will eventually be the holding company of AirAsia X Berhad (“AirAsia X”), announced it has signed a conditional sale and purchase agreement for Capital A’s strategic divestment and AirAsia Group’s strategic acquisition of its aviation businesses (the “Transaction”). This landmark agreement, approved by the boards of Capital A and AirAsia X, is expected to catalyse AirAsia to its next growth phase to become the world’s first low-cost network carrier and redefine the aviation industry landscape.
Under the terms of the agreement and subject to requisite approvals, the Transaction includes two parts:
The divestment of AirAsia Aviation Group Limited (AAAGL), consisting of AirAsia subsidiaries in Thailand, Indonesia, the Philippines and Cambodia, will be fulfilled through the issuance of new AirAsia Group shares to Capital A worth RM3 billion. Following this divestment, Capital A will immediately distribute-in-specie RM2.2 billion worth of the newly issued AirAsia Group shares to Capital A shareholders. Upon the completion of the proposed divestment and AirAsia X proposal, Capital A is expected to retain 18.39% of the enlarged issued shares of AirAsia Group.
The divestment of AirAsia Berhad, otherwise known as AirAsia Malaysia, for RM3.8 billion, to be satisfied by AirAsia Group’s assumption of RM3.8 billion of debt owed by Capital A to AirAsia Berhad.
Shareholders from both sides stand to gain as the value of the aviation assets is realised. Prior to the Transaction, AirAsia X’s shares and listing status will be transferred to AirAsia Group, effectively materialising the corporate structure of an enlarged aviation group, with AirAsia X’s shareholders then holding shares in AirAsia Group. The issuance of free warrants acts as a token of appreciation for shareholders’ continued support, while also providing them with the option to enhance their equity participation and contribute to the future growth trajectory of the enlarged aviation business. In recognition of the Transaction’s magnitude, a private placement is also proposed to fortify AirAsia Group’s financial standing, increase its shareholder base and improve the trading liquidity of its shares. From the perspective of AirAsia X shareholders, the allure lies in gaining access to an unlocked value of RM6.8 billion through a RM3 billion new shares issuance. This investment grants them ownership in a mature and ongoing airline business operation, comprising four established airlines that collectively form Asean's most extensive short-haul network, consolidating AirAsia Group's position as the largest low-cost carrier in Asean.
Capital A shareholders stand to benefit significantly as the proposed divestment is expected to unlock RM6.8 billion in value of Capital A's aviation business, more than double the current market capitalisation of the group. Following the divestment and the distribution-in-specie of RM2.2 billion worth of new AirAsia Group shares, Capital A shareholders will maintain direct ownership in the combined aviation businesses, ensuring access to future growth opportunities. Moreover, post-divestment, Capital A will retain four high-growth, aviation-focused core businesses, including Capital A Aviation Services, Teleport, MOVE Digital, and Capital A International, all poised for continued growth and diversification.
CEO of Capital A and Advisor to the newly formed AirAsia Aviation Group, Tony Fernandes said, “Today’s announcement is more than just a transaction, but a unique and time-sensitive opportunity to elevate our aviation business to the next level, while driving growth and profitability across core non-airline business portfolios for Capital A. The divestment facilitates clear distinction between Capital A’s main portfolios of businesses - the aviation group, digital businesses, and logistics plus aviation services to optimise synergies across entities and unlock greater value for all stakeholders.”
He added, “When AirAsia was founded in 2001, our vision was clear: to establish a low-cost airline model focused on simplicity and cost-efficiency, primarily operating single-type narrowbody aircraft optimised for short-haul flights. To capture the medium-haul market, AAX was created in 2007 adhering to the same principles of low-cost, and efficient operations. The emergence of Airbus’ A321LR and A321XLR, is an unprecedented, game-changing opportunity.”
Bo Lingam, Group CEO of AirAsia Aviation Group said, “We are excited about the dawning of a new era, where AirAsia and AAX operations will unify to create a single-type fleet that can reach the entire world, without the complexities associated with a mixed fleet. With extended 7- to 10-hour range capabilities and unparalleled fuel efficiency, these aircraft can fly further and more efficiently than previous narrowbodies, allowing us to explore new destinations and pioneering new and underserved routes, which has been the hallmark of AirAsia's success. Our ambition is to rival global giants with a profitable, low-cost network spanning the globe.”
Benyamin Ismail, CEO of AirAsia X said, “We wholeheartedly welcome the strategic acquisition. Over the next five years, we plan to leverage the extended range capabilities of the new specification aircraft to connect Asean to Europe, Africa, Central Asia, and North America, solidifying our position as a key player in the global aviation market. The “One Airline” strategy accelerates our journey, leveraging existing routes, approvals, and slots for rapid expansion. For AirAsia X shareholders, this is a rare opportunity to acquire not one, but four established and growing Asean-based airlines with existing routes, approvals and slots – at a cost outlay of just RM3 billion in new shares issuance. The proposed exercise offers AirAsia X a growth lifeline leveraging Capital A’s aircraft order book of almost 400 aircraft with an ongoing delivery timeline up to 2035. While the process has been long-winding and intricate, we remain committed to safeguarding shareholder interests.”
Fernandes explained, “Turning Capital A’s shareholders’ equity positive, which is a major step forward in exiting Practice Note 17 (PN17), is a welcome benefit but ultimately immaterial in our decision to pursue this proposed divestment. The puzzle of bringing together all AirAsia airlines under a single umbrella had been on our minds for many years and the missing piece has finally arrived in the form of the new-generation Airbus aircraft. Our driving motivation has been to unlock and realise value for our shareholders, though we also remain steadfast in our commitment to emerge successfully from PN17, propelled by our resilience and determination to navigate challenges.
“We have emerged out of the long tunnel called Covid, more resilient, refined and fortified. We have created five great companies– aviation, logistics, digital businesses, aviation services and IP business – all with enormous value and immense potential. I am confident they will evolve into the next AirAsia’s, embodying value and innovation,” he added.
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