Decision to acquire Batavia Air generates questions from the Ministry of Transportation which could eventually lead to a blockage of AirAsia in its acquisition…
JAKARTA- A few months ago, struggling Mandala Airlines was taken over by low cost carrier Tiger Air from Singapore. Now a second low cost Indonesian carrier Batavia Air could fall into the basket of the AirAsia Group. Through its subsidiary AirAsia Investment Ltd and an Indonesian partner PT Fersindo Nusaperkasa, an agreement was signed last week to acquire PT Metro Batavia which operates the Indonesian airline, Batavia Air as well as the Aero Flyer Institute (“AFI”), an aviation training school.
In accordance with Indonesian civil aviation ownership regulations, AAB will hold a 49% stake in Metro Batavia Group with the 51% majority held by its Indonesian partner, Fersindo. Fersindo is already involved with 51% of shares in PT Indonesia AirAsia (“IAA”). The total purchasing consideration for Metro Batavia Group is USD 80 million (equivalent to approximately RM253 million) and will be settled in cash. The acquisition of 100% interest in Metro Batavia by AAB and Fersindo will be carried out in two stages, through acquisition of a majority 76.95% stake and subsequently followed by the remaining 23.05% held by its existing shareholders. The acquisition is expected to complete by 2nd quarter 2013 and is subject to regulatory approvals in Indonesia.
The integration of Batavia Air will give back to AirAsia a share in Indonesia’s domestic market. In the last two years, Indonesia AirAsia reduced progressively its presence on domestic routes, keeping just a few, mostly where competition was weak or nonexistent. The new acquisition will then complement AirAsia’s existing strong market share in Indonesia’s international airline traffic, thanks to the extensive and well-established domestic route network throughout the Indonesian archipelago. The Batavia Air acquisition will in fact provide greater domestic connectivity and an extensive feeder network into IAA’s existing hubs in Jakarta, Bandung, Denpasar, Medan and Surabaya.
The addition of Batavia Air will provide AirAsia immediate access to a fleet of 33 aircraft, experienced pilots and flight crew and increasingly competitive slots at major Indonesian airports at a time when Indonesia’s travel sector is experiencing double-digit growth on the back of rapidly growing consumer demand for air travel. Indonesia will then become the group’s largest operation as both Batavia Air and IAA will fly more than 14 million customers serving 42 Indonesian and 12 international destinations. Batavia operates a limited international network to Singapore, Jeddah, Riyadh, Kuching, Dili and Guangzhou.
“The Batavia Air acquisition is a fantastic opportunity for AirAsia to accelerate our growth plans in one of the most exciting aviation markets in Asia and further underlines our belief in the growth potential of Indonesia’s aviation sector,” said Tony Fernandes, Group CEO and Director of AAB. “Recent developments in the airline industry have made me recognise that Batavia Air requires greater scale in order to compete and grow further, and I am so pleased that AirAsia will now take Batavia Air to even greater heights,” said Yudiawan Tansari, Batavia Air’s founder. Batavia got the assurance from AirAsia that it would keep its name and identity.
Will the Indonesian government accept the deal easily? According to the Jakarta Post, the government might looking at cancelling the acquisition, if the transaction breaches the ownership limit imposed on foreign companies in national airlines, a top government official has said.
The Transportation Ministry’s air transportation director general, Herry Bhakti Gumay, said AirAsia Berhard and its partner PT Fersindo Nusaperkasa most now display details about the potential acquisition to the ministry. “We will give Batavia, AirAsia Berhard and Fersindo Nusaperkasa one month to report their plan to us. We will cancel the acquisition process if Indonesia is not the majority shareholder,” Herry told the Jakarta Post correspondent. Fersindo would be the major shareholder at 51 % in compliance with Indonesian ownership rules. But authorities are also unsecured due to some nationalist feeling, when coming to air transport. After Mandala Air with Tiger, this is now Batavia. Which airline would be then the next candidate?
Luc Citrinot a French national is a freelance journalist and consultant in tourism and air transport with over 20 years experience. Based in Paris and Bangkok, he works for various travel and air transport trade publications in Europe and Asia.
