Business

Wednesday April 25, 2012

Analysts say tie-up without share swap better for both MAS and AirAsia

By LEONG HUNG YEE
hungyee@thestar.com.my


PETALING JAYA: The seemingly unfavourable share-swap agreement between Malaysia Airlines (MAS) and AirAsia Bhd continues to come under scrutiny with continued speculation that it could be unwound.

It has been reported that the Government has had serious second thoughts about the share swap because of continued criticism by Malaysia Airlines' 19,000 workers, many of whom are averse to AirAsia taking a substantial stake in MAS.

To recap, last August, major shareholders of MAS and AirAsia agreed to swap shares, with Khazanah Nasional Bhd agreeing to sell 20.5% of its over-68% stake in MAS to Tune Air Sdn Bhd while Khazanah bought a 10% stake in AirAsia from Tune Air. Khazanah may take a 10% stake in AirAsia's sister company, long-haul low-cost carrier AirAsiaX, later.

An analyst said that any decision to unwind the share swap would not come as a huge surprise.

Analysts say should the MAS-AirAsia deal be unwound, it will also dismiss anti-competition concerns.

“More importantly, unwinding the share swap does not mean no collaboration. There is no reason why both airlines can't get into mutually beneficial collaborative agreements, such as the joint purchase of aircraft, which could save both airlines' money and reduce outflows of money from the country,” said the aviation analyst.

Earlier reports had it that Malaysian Airlines System Employee's Union (Maseu) had met with Prime Minister Datuk Seri Najib Tun Razak to express its resistance with regards to the comprehensive collaboration framework involving a share swap between Khazanah and Tune Air.

Reports also have it that the share swap-inspired tie-up had affected MAS' staff morale.

Should the MAS-AirAsia deal be unwound, it will also dismiss anti-competition concerns.

As a result of the deal, MAS and AirAsia now work together instead of competing against each other and this has raised concerns of a monopoly in the domestic airline industry. It has also prompted the Malaysia Competition Commission (MyCC) to probe the deal. Investigations into the deal are still ongoing.

“I cannot make any announcement ... we are still investigating (the share-swap agreement). When the time is right, we will tell you,” MyCC chairman Tan Sri Siti Norma Yaakob was quoted as saying recently.

Analysts say a collaboration between MAS and AirAsia will no doubt be crucial with the impending implementation of the Asean Open Sky Policy in 2015. The policy will see increased competition with unlimited flight frequencies between Asean's 10 major cities.

An analyst said collaboration between the two local airlines would be able to stave off potential competition as regional airlines had been aggressively growing and starting up their own low-cost airlines, which had been effective vehicles to feed into legacy, premium carriers' long-haul routes.

Separately, MAS has scrapped its plan for a regional premium airline, surprising the industry, especially after announcing the plan in December.

The flag carrier also said it would not set up a new airline for its short-haul premium operations as planned earlier but would now create divisions within MAS that separated the short and long-haul operations.

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