| KUALA LUMPUR
KUALA LUMPUR Aug 9 Malaysian Airline System
(MAS) and rival AirAsia said on Tuesday they
will swap shares in a partnership that analysts say will
eliminate overlaps and boost the bottomline of both companies.
Under the deal, which is valued at about $364 million, Tune
Air, controlled by AirAsia founders Tony Fernandes and Kamarudin
Meranun, will take a 20.5 percent stake in MAS while state
investment arm Khazanah Nasional will hold 10 percent in
AirAsia, confirming an earlier Reuters report.
After the restructuring, MAS will dominate the premium
travel airspace and AirAsia the low-cost service, allowing each
to focus on their respective markets.
MAS would also have a new board of directors including
Fernandes, Kamarudin, builder IJM Corp's executive
deputy chairman Krishnan Tan and pay-TV Astro's chief executive
Rohana Rozhan. MAS' managing director Azmil Zahruddin will leave
to join Khazanah as an executive director.
"Why do we do this? I think we can make a lot of money,"
Fernandes told reporters at a briefing to announce the share
"(The agreement) allows us to refocus on growing the airline
100 percent and each of us will have routes to grow."
The share swap would also see MAS shareholders receiving one
AirAsia warrant for every 30 MAS shares held while AirAsia
shareholders will get one MAS warrant for every 10 AirAsia
This is the second major restructuring for MAS in the last
10 years, and some critics have painted the latest exercise as a
bailout of the national carrier which was rescued with about
$472 million of state money in 2001.
"There is no bailout, no conditional government money or
AirAsia money coming in," Khazanah chief executive Azman Mokhtar
Analysts say the new structure is expected to help MAS,
which has had a tumultuous history stretching back to 1997 when
unprofitable routes pushed it into the red during several
"We believe MAS will benefit more from the deal than AirAsia
in the near term as we expect more transformation moves will
take place at MAS," HwangDBS Vickers research analyst Juliana
Ramli wrote in a note.
"While both parties are likely to enjoy better purchasing
power as a combined entity, we think more importantly, the deal
could help reposition and turn around MAS as a premier long haul
In 2005, MAS suffered its worst year, reporting a net loss
of 1.3 billion ringgit which was blamed on high fuel prices and
The airline recovered in the two quarters following the
economic crisis, but it stumbled again in the last quarter.
In contrast, AirAsia has posted profits over the last four
quarters. It reported a net profit of 171.9 million ringgit in
its first quarter, which was down a quarter from the same period
a year ago.
The budget airline is planning initial public offerings in
Bangkok and Indonesia to expand in the region and recently drew
up plans to buy an extra 100 Airbus A320neo jets,
potentially taking a record-breaking order to 300.
Fernandes also said AirAsia would not scale back its plane
order as it expected demand for air travel to remain strong.
"This is about growth," he said.
Based on Thomson Reuters I/B/E/S, one out of 17 analysts
have a buy call on MAS stock, with seven holds and the rest
being underperform or sell calls.
Sixteen of 25 analysts tracked by Thomson I/B/E/S have
either a buy or strong buy call on AirAsia's stock, and seven
with a hold.
($1 = 3.019 Malaysian Ringgit)
(Editing by Liau Y-Sing and Muralikumar Anantharaman)