Air Asia aircraft model 9M-AQB is seen on track at Low Cost Carrier Terminal (LCCT) airport at Sepang outside Kuala Lumpur in Novemberg 2013. (Reuters Photo/Samsul Said)
Kuala Lumpur. Malaysian aviation tycoon Tony Fernandes says his AirAsia Group, the biggest budget carrier on the continent, may be interested in acquiring Indonesia’s TigerAir Mandala.
“We would look at [an acquisition]. We’ve done one acquisition — it wasn’t really our thing, but never say never,” Fernandes, the founder and chief executive of AirAsia, said on Monday on the sidelines of CIMB’s Invest Malaysia 2014 event in Kuala Lumpur.
Details about any deal will be disclosed during his visit to Jakarta today, Fernandes added.
Singapore-based TigerAir, a subsidiary of Singapore Airlines, and Indonesia’s Saratoga Capital, a diversified investment company, are reportedly selling their stakes in TigerAir Mandala, previously known as Mandala Airlines, while has been posting losses since its rebranding in 2012 due to higher operating costs.
AirAsia, based in Kuala Lumpur, was identified by a source last week as the strongest candidate for a possible acquisition. Other prospective buyers include a non-airline investor and Citilink, the low-cost unit of state-owned carrier Garuda Indonesia.
TigerAir holds a 33 percent stake in TigerAir Mandala, while Saratoga controls 51.3 percent. Creditors hold the rest.
Fernandes said rationalization and consolidation would be a common trend within the Indonesian aviation industry, as operational costs in Southeast Asia’s biggest aviation market continue to climb.
“There’s too much capacity in Indonesia right now and without a doubt there will be a rationalization of airlines soon,” he said, citing Citilink and AirAsia’s local unit, Indonesia Air Asia, as examples of Indonesian budget carriers struggling to stay profitable.
“I think Citilink is losing lots of money… For Indonesia AirAsia, maybe we can make some money this year, but it’s very hard,” Fernandes said.
Indonesia’s aviation industry has been fumbling for profit as the weakening rupiah — which lost 26 percent of its value against the US dollar last year — and the fast-growing demand from the country’s burgeoning middle class burden the industry with higher operational costs.
In addition, higher airport taxes have exacerbated the situation for airlines, according to Fernandes.
“AirAsia has tried to develop many international routes, but airport tax keeps going up, so we have to cancel routes,” he said. “Airports have to play their part — we gotta land somewhere.”
Indonesia AirAsia canceled its Jakarta-Makassar service in February, citing rising costs to serve the 1,600-kilometer route.
While the potential for budget airlines in Indonesia remains massive, Fernandes urged the government to play a part in improving airports, especially in addressing the urgent need for more landing space.
He also foresees a systematic overhaul of the country’s aviation industry — from consolidation to capacity cutting — on the horizon.
“It’s a shame. I think the Indonesian aviation industry could be huge, but costs are going up too fast and fares are not as affordable as they used to be,” Fernandes said.
“There needs a little bit of a rethink [of the aviation industry] in Indonesia.”
By Vanesha Manuturi on 10:27 pm Jun 09, 2014
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