AirAsia scraps Batavia plan, to push Jakarta IPO

THOROUGH EVALUATION: Fernandes says timing ‘inappropriate’ and that tie-up may induce too many risks, lead to earnings dilution

LOW-cost carrier AirAsia Bhd will be pushing ahead with its initial public offering (IPO) plans in Indonesia after it decided to scrap the tie-up with PT FersindoNusaperkasa over the PT Metro Batavia transaction.

"Our aggressive focus in Indonesia remains and we will push our Indonesian IPO plans while still maintaining close cooperation with Batavia Air," said AirAsia group chief executive officer Tan Sri Tony Fernandes yesterday.

"The company's decision was based on a thorough evaluation by many parties into Batavia Air. In our minds, the timing was perhaps not appropriate as it would have induced too many risks and would ultimately be earnings dilutive to our shareholders."

Instead, the airlines now have decided to collaborate on encompassing ground handling, distribution and inventory systems.

AirAsia and Fersindo announced in July that they will acquire Batavia Air and Aero Flyer Institute, an aviation training school, for RM245 million.

Batavia Air and Aero Flyer Institute are being operated by PT Metro Batavia.

AirAsia shares fell one sen to close at RM3.05 on Bursa Malaysia yesterday.

"We have learnt a tremendous amount and feel very confident that we will be a market leader in Indonesia," Fernandes said in his Twitter account.

Meanwhile, Batavia Air managing director Alice Tansari said the airlines' collaboration agreement will help support them to continue providing the best service and choices for Indonesian travellers.

AirAsia and Batavia Air will also immediately establish a separate aviation training joint venture with classroom, fixed-wing and simulation training facilities.

"All parties are fully committed to ensuring that the proposed collaboration will be in compliance of all local competitions regulations," AirAsia said in a statement.

Meanwhile, Maybank Investment Bhd analyst told Business Times that the rationale behind the acquisition is to fast forward AirAsia's growth strategy in Indonesia, whereby Batavia Air can provide a comprehensive distribution system for Indonesia AirAsia across the country.

"Apparently, that is where the synergy is supposed to derive from but that is just a very simplistic statement. We were waiting for more information and more clarity as they go along but unfortunately it was over before it started.

"Perhaps after closer scrutiny it is best that they did not merge and that is why they took the decision. They can still grow slow and steady in Indonesia," he said.

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