General News 6 Sept 2011

Malaysia Airlines (MAS) and budget airline AirAsia have signed a landmark agreement that will mark the end of the flag carrier’s wholly-owned low-cost subsidiary FireFly. MAS and AirAsia plan to co-operate to take advantage of their core strengths, reducing competition and co-operating where possible in aircraft purchasing, engineering, ground support services and catering. The deal is valid for five years, with a provision to extend for another five.

6th Sep 2011


General News

 

MAS, AirAsia sign landmark partnership deal

 

 

Malaysia Airlines (MAS) and budget airline AirAsia have signed a landmark agreement that will mark the end of the flag carrier’s wholly-owned low-cost subsidiary FireFly.

MAS and AirAsia plan to co-operate to take advantage of their core strengths, reducing competition and co-operating where possible in aircraft purchasing, engineering, ground support services and catering. The deal is valid for five years, with a provision to extend for another five.

Under the agreement, Tune Air, which manages AirAsia, will acquire a 20.5 percent stake in MAS through a share- swap. AsiaAsia group Chief Executive Officer Tony Fernandes and deputy Chief Executive Officer Kamarudin Meranun have both been appointed to the MAS board.

In return, Khazanah Nasional, the government investment arm which is the parent of MAS, will take a 10 percent stake in AirAsia. One MAS director will sit on AirAsia’s board.

The deal is said to be valued at US$666 million. Khazanah will remain MAS’s majority shareholder, with a 49 percent stake. The agreement will leave AirAsia as Malaysia’s only regional LCC, with AirAsia X as the only medium- to long-haul LCC, subject to anti-trust review.

MAS will focus on being a full-service carrier, while Firefly’s single-aisle jet operations will be reviewed to be taken up at a later stage, either by MAS itself or by a new subsidiary. The MAS subsidiary’s turboprop operations from Sultan Abdul Aziz Shah Airport in Subang will continue as a “community airline”.

The deal, described by a MAS official as a “restructuring” of Malaysia’s aviation industry, will take effect only after being approved by competition regulators. In Malaysia, the Competitions Act, which will be implemented in January 2012, prohibits anti-competitive agreements and abuses by dominant players in their field.

The regulators will require the airlines to make anti-trust assessments for the areas in which they plan to cooperate. The airlines will then have to seek the necessary anti-trust approvals before undertaking or implementing them.

The carriers dismissed the possibility that aircraft orders that had already been placed could be scaled down.

“The deal is mutually beneficial to both parties,” says MAS’s newly appointed Executive Director Mohd Rashdan Mohd Yusof.
The deal paves the way for AirAsia to have a monopoly in the low-fare segment of the travel market, where it was feeling the heat of competition from Firefly, while MAS itself was badly hurt by competition from AirAsia X to destinations such as Perth, Melbourne, Seoul, Tokyo-Haneda and several Indian routes.

A Kuala Lumpur-based analyst says that MAS, which is already reeling from heavy losses, could have ended up worse off, if not for the deal with AirAsia.

 William Dennis


 New Beijing Airport plans expanded

New Beijing Capital International Airport (NBCIA) will be a mega facility intended to handle as many as130 million passengers a year by 2040.

This plan is substantially more ambitious than earlier proposals, which envisaged handling capacity of 60 million. Under the NBCIA Master Plan, the airport will now have five terminals and eight runways.

The Master Plan focuses on sustainability and the design incorporates all modes of public transport – including high-speed trains, metro and inter-airport trains – all which will be based in a ground transportation centre in front of the new terminals.

According to an official of the Civil Aviation Administration of China (CAAC) in Beijing, Xi Xuanze, the layout of the runways, taxiways and aprons have also been carefully designed to keep taxi distances as short as possible, and in turn reduce fuel burning and carbon dioxide emissions.

The government has budgeted US$15 billion for the first construction phase, which is expected to start before the end of the year, one year late due to the revision of the plans for the airport.

In Phase 1, the airport will have two runways and one terminal with annual capacity for 40 million passengers. It is expected to be operational in 2017, handling domestic flights.

The second phase will see the construction of a second terminal to increase capacity to 60 million, while plans for the subsequent phases will depend on growth of the facility.

The airport will complement the existing Beijing Capital International Airport (BCIA), to meet anticipated growth in the domestic air travel market. The facility will be located in Daxing district in southern Beijing. The airport is one of 11 under construction in China this year.

BCIA is expected to reach its maximum capacity of 80 million by 2013 or before. Traffic at the airport has grown at an average 13 percent per annum from 2001-2010.

 William Dennis

 

 

Asian Aviation at a glance