AirAsia buys into ZestAir Group in share swap deal

(Updated 4:09 p.m.) Philippines' AirAsia Inc., the local arm of Malaysia's low cost carrier AirAsia Group, on Monday entered into a share swap deal with Zest Airways Group of former ambassador and juice magnate Alfredo Yao.

 

Under the  strategic alliance agreement signed at the Dusit Hotel in Makati City, Philippines' AirAsia would acquire a 49 percent stake in ZestAir and 100 percent in Asiawide Airways—both under the ZestAir Group. 

 

In turn, Yao's group would subscribe to a 15 percent stake Philippines' AirAsia. The transaction would dilute the shareholdings of Antonio Cojuangco Jr., Michael  Romero, and Marianne Hontiveros to 15 percent each. 

 

“The Philippine market is fairly small in comparison to what it should be and we should look at existing markets as this strategic partnership is all about growing market,” AirAsia Group chief executive officer Tan Sri Tony Fernandes told reporters at a press conference.

 

“I’ve been involved in the airline business in Thailand Malaysia, Indonesia and the Philippines has a lot, lot more growth, there is so much this country can offer to inbound tourists and Filipinos going overseas,” he added.

 

Fernandes cited Malaysia, a market much smaller than the Philippines but with whose inbound tourism is 10 times larger.

 

“Today's strategic alliance between our two local carriers brings pride and joy to the Philippines' AirAsia,” Philippines AirAsia CEO Hontiveros said in a statement distributed to reporters before the press conference on deal started.

 

“I am especially delighted to have Yao of ZestAir as partner as he shares a common vision to provide passengers with the best value fare possible which enables them to fly to various destinations,” Hontiveros added.

 

The  proposed investment in ZestAir Group would complement future growth strategies of Philippines' AirAsia, which operates out of Clark International Airport. 

 

“I am truly excited about this alliance as it will take both companies to greater heights,” said Philippines' AirAsia chairman Cojuangco.

 

“The Philippines aviation market has tremendous upside potential. Bringing these two carriers together will definitely realize this potential,” Cojuangco added. 

 

“This will allow us to leverage on our respective strengths, which in the case of Zest Air include its operations out of NAIA... a majority of the air traffic in the Philippines and a strong domestic network which feeds into its current international routes,” Hontiveros noted. 

 

ZestAir operates at the congested Ninoy Aquino International Airport (NAIA).

 

Yao said the ZestAir Group sees the strategic alliance boosting their competitiveness against other low cost carriers. 

 

“It provides a great opportunity to realize both carriers' common vision to widen the choice of low cost travel within the Philippines and the region,” he noted.  

 

“The goal in ZestAir is driven by my passion to capitalize on the tourism potential and, hence, our investment to quickly increase our fleet and expand ZestAir’s market share,” Yao said.

 

With a fleet of over 120 aircraft and an additional 350 about to be delivered, the AirAsia Group maintains partly owned subsidiaries in Malaysia, Thailand, Indonesia, Japan, and the Philippines as well as India—making it Asia's largest low cost carrier. 

 

Prior to the share-swap deal, Cojuangco, Michael Romero and Hontiveros each owned 20 in Philippines' AirAsia with  Fernandes having 40 percent.

 

Listed Cebu Air Inc. of taipan John L. Gokongwei Jr. and China's Hainan Air have expressed interest in buying into ZestAir. — SOA/VS, GMA News