AirAsia Berhad, one of the most renowned global airlines carriers from Malaysia, was founded by DRB-Hicoma, a government-run business conglomerate in 1994, and it started operations on November 18, 1996, with its headquarters near Kuala Lumpur, Malaysia.
On December 2, 2001, former Time Warner (TWX, Financial) executive Tony Fernandes' company Tune Air Sdn Bhd purchased AirAsia, which was neck-deep in $11 million worth of debts, for the token sum of about $0.26 at that time. Fernandes launched new routes from its hub in Kuala Lumpur, with very low promotional fares. AirAsia surged ahead in competition with monopoly operator Malaysia Airlines, producing a profit in 2002.
AirAsia group runs scheduled national and international flights to 100 destinations across 22 nations. Its affiliate airlines are Thai AirAsia, Philippines AirAsia, AirAsia Zest, Indonesia AirAsia and AirAsia India. AirAsia X, its subsidiary, focuses on long-haul routes.
AirAsia operates at $0.023 per available seat kilometres (ASK), which is the world's lowest unit cost of and a 52% passenger break-even load factor. AirAsia achieves an average aircraft utilisation rate of 13 hours a day, has an aircraft turnaround time of 25 minutes, and its crew productivity level is triple that of Malaysia Airlines.
By early 2013, AirAsia's profits surged by 168% on a year-over-year basis in comparison to the same time in 2012. The airline's net profit stood at $114.08 million, by the quarter ending on 31 December 2012. The airline recorded profits for its full 2012 fiscal year, despite a 1% rise in the average fuel price.
AirAsia sells majority stake to Expedia
Expedia (EXPE, Financial) has announced that it will take an additional 25% stake in its joint venture with AirAsia Berhad. The company will put an additional $86.3 million to increase Expedia’s total ownership to 75%. AAE Travel Pte. Ltd., a joint venture company, was incorporated in Singapore on June 3, 2011 and runs as a licensed online travel agency in Singapore. Expedia and AirAsia each now have a 50% stake in AAE Travel, through AirAsia and Expedia Southeast Asia respectively.
AAE currently operates Expedia-branded travel websites in India, Hong Kong, Singapore, Malaysia, Korea, Taiwan, Vietnam, Japan, and Philippines in addition to AirAsiaGo.com.
Expedia has been on a rapid expansion mode, with the recent acquisition of Orbitz Worldwide for $1.3 billion, which came a month after the company purchased Travelocity for $280 million.
The transaction is expected to close in the first half of 2015, with AirAsia amending certain non-disclosed additional agreements with Expedia.
Effects of the divesting
AirAsia’s prime reason for divesting stake in AAE is to monetise its investment in the joint venture and to boost its liquidity and availability to capital. The company is looking forward to maximize sales opportunities by making its inventory accessible across a number of sales channels and locations.
For Expedia, it is a very lucrative deal as Asia continues to be an emerging fast-paced market, and increasing its stake in AAE will be instrumental in helping the growth of the company’s business in the region.
With Expedia’s acquisition of majority stake in AirAsia, which comes right after the company’s other consecutive major acquisitions, it must be good news for most of the stakeholders. But it remains to be seen how it will affect the hotel industry, which is heavily dependent on online travel agents (OTAs) for their revenue and profits.
