Air Asia end share swap deal

Budget flyer AirAsia and state-owned Malaysia Airlines Wednesday back tracked on a share swap agreement following months of pressure from the powerful employees union of the struggling national carrier.

With the revoking of the co-operative deal, Air Asia’s CEO, Tony Fernandes and his partner resigned from the Malaysia Airlines’ board, and a Malaysia Airlines representative left AirAsia’s board.

Both sides said in separate statements they were reversing a share swap agreement, but would continue to cooperate on other matters to save costs in joint procurement, aircraft component maintenance, support and repair services.

Malaysia’s state investment arm Khazanah Nasional, which holds a majority stake in Malaysia Airlines, called on the loss-making carrier to close ranks after pressure from its 15,000-member union to undo the agreement.

Khazanah managing director Azman Mokhtar said collaboration remained a “key instrument” of the plan to turn Malaysia Airlines around, but the share swap was “a distraction”.

Since taking office in 2009, Prime Minister Najib Razak has embarked on an ambitious programme to overhaul the economy and public sector, including selling off stakes in troubled state-owned companies.

Under the deal signed by the once bitter rivals last August, Malaysia-based AirAsia agreed to acquire 20.5% of Malaysia Airlines, while Khazanah would have got a 10% stake in Tune Air, AirAsia’s parent company.

But the Malaysia Airlines union opposed the agreement over fears it would lead to the downsizing of their carrier and lobbied Najib, who is expected to call for elections soon, to scrap it.

Shukor Yusof, a Singapore-based aviation analyst with Standard and Poor’s, said Malaysia Airlines had ended up as the bigger loser, while AirAsia’s foundations remained solid.

“For MAS, it’s still in a dismal position… and probably even worse in terms of staff morale. There is a lot of damage that’s been done in the past eight months,” he told AFP.

Shares of the two carriers were suspended from trading Wednesday pending the announcement. Trading was to resume Thursday.

The two airlines said Wednesday they may set up a joint venture company to explore procuring high-spend items, such as fuel and oils, insurance, information technology and communications.

Another joint venture may be set up for aircraft component maintenance, support and repair services, they said.

Source - ttrweekly