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| Azman Mokhtar and Fernandes at the collaboration signing |
The collaboration agreement would not be committed upon once an anti-trust analysis had been completed
The Collaboration
It has been rumoured that Malaysian Airline System (MAS) and budget carrier AirAsia Bhd will form a working relationship. This is finally taking place with shareholding changes in both airlines.
On August 10, 2011 both airlines inked a landmark deal that is set up to reshape the aviation industry. By cooperating to leverage on their core strengths and expertise, the two carriers plan to lower competition and cut costs in the areas of aircraft purchases, engineering ground support services, cargo services, catering and training.
The whole idea of the collaboration is to salvage MAS and realign its business to become a truly premium carrier along the likes of Singapore Airlines (SIA) and Emirates.
A joint collaboration committee chaired by Azman Yahya will be set up to ensure that the collaboration goes according to plan. The other committee members include Mohd Rashdan, Fernandes and Kamarudin.
Share Swap
Tune Air Sdn Bhd which is owned by Tan Sri Tony Fernandes and Datuk Kamarudin Meranun, via a share swap, will end up with 20.5% equity in MAS. In turn, MAS’s parent, Khazanah Nasional Bhd, will take up a 10% stake in AirAsia Bhd. This brings the investment arm’s stake in MAS down to 49% from 69%. The government also retains its golden share in MAS, whereas Tune Air Sdn Bhd reduce its stake in AirAsia from 23% to 10% after the share swap.
The deal is said to be to be valued closed to RM2 billion based on Friday’s (August 5, 2011) closing, with MAS closing at RM1.60 a share and AirAsia at RM3.95 per share.
The Board
As part of the deal, Tony Fernandes and Datuk Kamarudin Meranun from AirAsia will sit on the MAS board, and Datuk Azman Yahya, MAS director will join the AirAsia board.
The collaboration of AirAsia and MAS saw the appointment of several corporate figures with financial background and the founders of AirAsia being appointed to the MAS board.
Tony Fernandes and Kamarudin Meranum were appointed as non-independent non-executive directors of MAS. Tan Sri Krishnan Tan, former IJM Corp Bhd managing director and Tan Sri Wan Azmi Wan Hamzah, former Land & General Bhd have been appointed to the board of MAS as independent non-executive directors. Two other independent non-executive directors are Datuk Rohana Rozhan Astro, CEO of Malaysia Holdings Sdn Bhd and David Lau Nai Pek of Celcom Axiata Bhd.
Meanwhile, Azman Yahya has been appointed as the non-independent non-executive director of AirAsia Bhd.
The Management
Mohammed Rashdan Mohd Yusof, seconded from Khazanah, has been appointed as executive director of MAS. While, MAS’s managing director Tengku Datuk Seri Azmil Zahruddin stepped down to join Khazanah Nasional as its executive director for investment.
MAS’s board has established an Executive Committee (exco), that will oversee the management of the company until a new managing director is appointed. The exco will be chaired by chairman Tan Sri Md Nor Yusof. Members will include Datuk Mohamed Azman Yahya, Mohammed Rashdan, Tony Fernandes and Kamarudin Meranun.
The Business
The deal struck between Air Asia Bhd and Khazanah Nasional Bhd will not see AirAsia or MAS cut back on neither routes nor plane orders. AirAsia recently made an order for another 200 aircraft while MAS added another 10 aircraft to its ongoing fleet renewal programme. Its order of six A380s is also part of MAS’s fleet renewal programme.
The turboprop operations of Firefly, MAS’s low-cost unit, will become a fully service carrier to ply regional flights. Both AirAsia and sister airline AirAsia X will stick with low-cost airline model for short, mid and long-haul routes.
Conclusion
What Tony Fernandes said: “There’s no need for AirAsia and MAS to cut back on any routes. There are five-star hotels and there are three-star hotels, this is not about rationalization and cutting back. This is about growth.”
What Tan Sri Azman Mokhtar, CEO of Khazahah said: “There are many ways to structure this, particularly for aviation, but we structured this in such a way that the two airlines remain distinct and separate. Separate brands, separate business models, separate governance, separate board, separate cultures even, and the idea is to focus on the core competencies."
Abd Rahaman Rasid
Felda, August 11, 2011
2 comments:
always believe in buiding core compencies in competitive strategy always have advantage.....
Congratulation to both of your companies, I think that this partnership will be beneficial to both of them.
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