AirAsia acquires 49% stake in ZestAir

MANILA, Philippines - Philippines’ AirAsia Inc., the local arm of Asia’s largest low cost carrier AirAsia Group of Malaysia, has acquired a 49-percent stake in the Zest Airways Group of juice magnate Alfredo Yao through a share-swap transaction.

Philippines AirAsia and ZestAir Group entered into a strategic alliance agreement at the Dusit Hotel in Makati City yesterday that was attended by no less than AirAsia Group chief executive officer Tan Sri Tony Fernandes.

Fernandes said Asia’s largest low cost carrier is bullish about the prospects of the aviation industry in the Philippines as he brushed off talks regarding overcapacity in the local airline industry.

“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. 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 stressed.

He cited the case of smaller countries like Malaysia with a market inbound tourism that is 10 times.

Under the partnership, Philippines AirAsia would invest in the ZestAir Group by acquiring a 49-percent stake in Zest Airways and 100 percent in Asiawide Airways while Yao would take a 15-percent interest in the local unit of the AirAsia Group.

The AirAsia Group already has a presence in the country through Philippines AirAsia that is 40 percent owned by Fernandes’ AirAsia Investment Ltd with 60 percent controlled by Filipino shareholders including Antonio “Tonyboy” Cojuangco Jr., Michael Romero, and Philippines AirAsia chief executive officer Marianne Hontiveros with 20 percent each.

With Yao getting a 15-percent stake in Philippines AirAsia, the shareholdings of Cojuangco, Romero, and Hontiveros would be reduced to 15 percent each.

 â€œToday’s strategic alliance between our two local carriers brings pride and joy to the Philippines’ AirAsia. 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 stressed.

She pointed out that the proposed investment in ZestAir Group would complement the strategies for future growth of Philippines AirAsia which operates out of Clark while ZestAir operates at the congested Ninoy Aquino International Airport (NAIA).

“This will allow us to leverage on our respective strengths, which in the case of ZestAir, include its operations out of NAIA which constitutes a majority of the air traffic in the Philippines and a strong domestic network which feeds into its current international routes. The stockholders of Philippines AirAsia welcome this partnership with Yao, a seasoned entrepreneur who is well regarded in the Philippines,” she added.

 Hontiveros said shareholders of Philippines AirAsia would infuse additional funds to augment the company’s working capital but said the details are still being finalized.

“We have not pinned down exactly what is needed because now we are going to look at all the figures and decide what is needed for the re-fleeting of ZestAir as well as Philippines of AirAsia so no figures has been discussed,” she added.

Yao said the ZestAir Group is delighted with the strategic alliance. Yao’s ZestAir flies to 14 domestic destinations and 10 international destinations using its hubs in Manila, Kalibo, and Cebu using its fleet of 11 aircraft.

“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. 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 Zest’s market share,” Yao stressed.

The investment in Philippine AirAsia aligns with the AirAsia Group’s business strategy with existing operations in Malaysia, Thailand, Indonesia, Japan, and the Philippines as well as India making it the largest Asian low cost carrier.

 The AirAsia Group has a fleet of over 120 aircraft and an additional 350 about to be delivered. It operates 81 destinations in 18 countries.

The AirAsia Group late last year confirmed 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.