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SEAIR, Asian Spirit merger looms; streamlining eyed

April 14, 2008 1:49am

MANILA, Philippines - Juice taipan and banker Alfredo M. Yao plans to merge budget carriers Asian Spirit, Inc. and South East Asian Airlines, Inc. (SEAIR) by yearend, in a bid to make the merged entity more competitive amid rising fuel prices by streamlining redundant destinations and cutting costs.

This as he completes negotiations for his takeover of SEAIR within the next two months, shortly after buying Asian Spirit last month.

"I still don’t know which [of the two airlines] will be the surviving entity after the merger," Mr. Yao said. He also did not say whether the merger would result in layoffs.

Mr. Yao, chairman of juice manufacturer Zest-O Corp., said his talks with SEAIR owners, including Nikos Gitsis, Iren Dornier and Tomas B. Lopez, are already at their final stage.

"There was already a meeting of the minds," Mr. Yao told reporters in a chance meeting in Boracay on Friday.

He said his group has started due diligence on SEAIR to prepare for the change of ownership. He admitted that the acquisition cost for SEAIR has been finalized, but declined to confirm reports that the price was around P1 billion, similar to the price tag of Asian Spirit.

Last month, Mr. Yao acquired Asian Spirit through AMY Holdings, Inc., an investment company that he owns with his siblings. The share purchase agreement was signed after five months of intense negotiations.

He said discussions on the SEAIR acquisition had started at about the same time, adding that a deal would be signed by June.

With his looming purchase of SEAIR, Mr. Yao can dominate low-cost flights to Caticlan, the gateway to the island of Boracay.

Data from the Godofredo P. Ramos Airport in Caticlan showed that Asian Spirit and SEAIR captured a combined 60% of the 7,352 reported flights to and from Caticlan last year.

The rest was cornered by Cebu Pacific, Air Philippines and Island Getaway. The latter two are owned by tycoon Lucio Tan, whose Philippine Airlines is also venturing into destinations with smaller airports after it bought nine small aircraft last week.

Mr. Yao, who also owns Philippine Business Bank and Export and Industry Bank, said he intends to merge the two airlines within the year to strengthen domestic operations.

Set up in 1995, Asian Spirit flies to 12 local and three international destinations like Incheon, Korea; Sandakan, Malaysia; and Macau using a fleet of 10 planes.

SEAIR was established in the same year and now has 11 planes that fly to 16 domestic destinations.

Mr. Yao said he would streamline redundant destinations once the merger is completed.

He added that the merger would consider the strength of Asian Spirit in its international flights, and of SEAIR, which has focused on its fast flights to local destinations like Palawan and nearby islands. - BusinessWorld
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