SEPANG: AirAsia is selling 25% of its online travel portal joint-venture firm for US$86.3mil or RM306mil in cash, representing a hefty gain on disposal of about RM280mil, just after three years of starting this business with global online travel player, US-based Expedia Inc.
The stake is being sold to Expedia, which will now own 75% of the company, called AAE Travel Ltd, while AirAsia will retain 25%.
AirAsia said its rationale for the sale was to monetise its investment and to increase its access to capital.
The sale comes at a time when the budget airline’s passenger load factor dipped 3% in the fourth quarter ended Dec 31, 2014.
AirAsia group chief executive officer Tan Sri Tony Fernandes said: “We started the joint venture (JV) with Expedia back in 2011 and together we’ve built a fantastic business. The vision of marrying Expedia, a globally recognised and highly regarded travel agency, with the AirAsia group network has yielded a significant return in just over three years.
“We remain committed as partners as Expedia continues to develop in this region, and this agreement will simultaneously allow for the AirAsia group to further develop and diversify its distribution network.”
In connection with this transaction, AirAsia has also amended and concurrently executed certain additional agreements with Expedia.
RHB Research analyst Ahmad Maghfur Osman told StarBiz that the sale would be positive for AirAsia, not just in terms of increasing its working capital, but that the lower stake might also lead to adjustments of exclusivity agreements between the two.
“Now, AirAsia could forge partnerships with other online travel portal operators such as hotels.com or booking.com which are more widespread in the Asean region. This will diversify their online sale channels and boost the load factor,” he said.
Last October, Expedia general manager for Asia, Vikram Malhi, was quoted in media reports as saying he conceded that Expedia was relatively a new player in the Asian market but was confident it was “in the right place at the right time”.
Fernandes said the sale was in line with the company’s strategy of making early equity investments in adjacent businesses that had strong synergies with AirAsia across the travel value chain.
“Over the years, AirAsia has also invested in partnerships with Tune Insurance, Asian Aviation Centre of Excellence with CAE, Think Big Digital with Aimia and Tune Money, and we continue to look for additional partnership opportunities,” he said.
AAE Travel was incorporated in June 2011 in Singapore and operates as a licensed online travel agency in the country.
It has or intends to have a presence in Malaysia, Brunei, Cambodia, Japan, Hong Kong, India, Laos, Macau, Myanmar, Singapore, the Philippines, Indonesia, Taiwan, Thailand, South Korea and Vietnam.
AirAsia’s gain on disposal would be realised in the first quarter of this year and would see its net tangible assets increase by 10 sen per share, the company said.
The sale consideration, which works out to around US$14.04 or close to RM50 per share, was arrived at using discounted future cashflows of AAE Travel.
AirAsia said the sale would also be positive to its earnings per share and gearing ratio, without specifying by how much.
AirAsia shares added two sen or 0.76% to close at RM2.64 yesterday.