Capital A's Strategic Move: Divesting Aviation Business to Focus on Growth

Capital A Berhad, the parent company of AirAsia and a leader in aviation and travel services, has announced a significant strategic decision. The company is set to dispose of its aviation business, which includes AirAsia Berhad (AirAsia Malaysia) and AirAsia Aviation Group Limited, comprising subsidiaries in Thailand, Indonesia, Philippines, and Cambodia. The proposed recipient of this major transaction is AirAsia X Berhad (“AAX"). This move is designed to streamline the group, facilitating a business-centric valuation of the separate entities and potentially unlocking greater value for shareholders.

Tony Fernandes, CEO of Capital A, outlines the rationale behind this strategic disposal. With all businesses under Capital A flourishing, the need to raise funds for expansion has become paramount. The company's Practice Note 17 (“PN17") status has posed challenges in accessing capital. In response, Capital A is engaging with investors who show a strong preference for a pure aviation play.

The proposed sale to AAX aims to create an aviation-centric entity, consolidating both long and short-haul airlines under the AirAsia brand. This is contingent on negotiating a definitive share sale and purchase agreement and its completion. The benefits of this move are multifold. The aviation business, post-disposal, is expected to benefit from focused management and a clear strategic direction. This is anticipated to enhance its capacity to seize growth opportunities, expand market share, and ultimately boost profitability.

Simultaneously, the separation of the aviation business is expected to bring into focus the non-aviation businesses within Capital A, which are believed to be currently undervalued. These include Teleport (logistics), Capital A Aviation Services (MRO and Inflight), and MOVE digital. Capital raising efforts for these entities are planned, offering shareholders an uplift on their Capital A shares, complemented by shares in the enlarged aviation group under proposed shares distribution.

The strategic decision to create a pure play entity aligns with market preferences, offering a clearer understanding, valuation, and appreciation for the distinct strengths of both aviation and non-aviation businesses. For regular business travelers, family vacationers, and personal adventurers, this move by Capital A signifies a commitment to enhancing their travel experiences by focusing on the core strengths of each entity. With Capital A shareholders set to become shareholders of two strong listed companies, this strategic move is poised to unlock greater value and clarity in investments, while creating a more focused shareholder base.