AirAsia, ZestAir set joint venture

MANILA, Philippines - Malaysia’s AirAsia Group and Zest Airways Inc. of Amb. Alfredo Yao are set to announce a partnership following bright prospects now facing the country’s aviation industry with the impending lifting of the ban imposed by the US and Europe on domestic airlines.

Sources said the AirAsia Group and ZestAir are expected to announce a joint venture today involving the buy-in by the Malaysian airline of a stake in the local airline owned by the owner of juice maker Zest-O Group.

As early as last year, ZestAir has been on the lookout for a joint venture partner to buy a 40-percent stake in the budget carrier.

The Philippine Constitution limits the ownership of foreigners in transportation companies as well as public utilities to no more than 40 percent.

Apart from AirAsia, other airlines that have expressed interest in ZestAir included publicly-held Cebu Air Inc. (Cebu Pacific) of taipan John L. Gokongwei Jr. and Hainan Air of China, among others.

The same sources said AirAsia Group chief executive officer Tan Sri Tony Fernandes flew into the country last week to finalize the deal.

The AirAsia Group already has a presence in the country through Philippines AirAsia Inc. Apart from Fernandes, the local airline is also owned by Antonio “Tonyboy” Cojuangco Jr., Michael Romero and Marianne Hontiveros with 20 percent each.

The AirAsia Group late last year ordered another 100 Airbus A320 which further acknowledges its dominance in Asia to have a record 475 narrow bodies on order with Airbus as part of its regional strategy to continue placing the airline ahead of competition regionally with its extensive growth through new routes and added frequencies.

The 100 Airbus A320s ordered consist of 36 A320s with the Current Engine Option and 64 A320s with the New Engine Option (NEO) to accelerate its growth in its core markets Malaysia, Thailand and Indonesia followed by its new markets Japan and the Philippines.

In line with growth plans, in 2013 through combination of firm Airbus deliveries and leases – Malaysia would take delivery of 10 aircraft, Thailand – eight , Indonesia – nine, Philippines – three, and Japan - four aircraft.

Philippines AirAsia Inc. chief executive officer Maan Hontiveros earlier said the airline is set to launch more international routes and at the same time increase flight frequencies in existing routes as part of a refleeting program undertaken by its parent firm AirAsia with the acquisition of 100 Airbus aircraft.

“This early our guests can look forward to even more exciting routes from AirAsia as we add connectivity to other parts of Asia as well as increase frequency to existing routes starting next year making air transport via Clark more exciting than ever,” she said.

ZestAir intends to acquire three aircraft per year under a five-year refleeting program to beef up its existing fleet of 12 Airbus A320 and nine turbo-propped engine aircrafts.

The new planes would be deployed to additional five local destinations and three to four regional destinations set to be launched this year. ZestAir has a network of close to 30 domestic destinations and around 10 international destinations.

The local aviation industry, which is ripe for consolidation, also faces a bright future with the impending lifting of the ban on domestic airlines from mounting additional flights to the US and flying to Europe after the Civil Aviation Authority of the Philippines (CAAP) passed the audit conducted by the International Civil Aviation Organization’s (ICAO) of the United Nations from Feb. 18 to 22.

The Department of Transportation and Communications (DOTC) has announced that ICAO has officially delisted the Philippines from its tally of member states with unresolved significant safety concerns.

With the lifting of the safety concerns, CAAP could now focus on regaining the US FAA Category 1 rating. Category 2 status is issued by the FAA to the civil aviation authorities of countries that are non-compliant to ICAO Standard and Recommended Practices (SARPs) on international civil aviation safety.

In 2008, the safety rating of the Philippines was downgraded by the US FAA upon the recommendation of the ICAO to Category 2 from Category 1after CAAP failed to comply with safety standards for the oversight of air carrier operations.

Furthermore, the 27-member European Commission decided in April 2010 to impose a ban Philippine carriers from European airspace for the failure of the CAAP to reform the country’s civil aviation system.