Malaysia’s AirAsia, Fersindo to Buy Indonesia’s Batavia Air

Jakarta — The acqusition–AirAsia’s first large airline purchase–is expected to close by the second quarter of 2013 and is aimed both at growing its Indonesia footprint and better tapping into Southeast Asia’s burgeoning air travel market.

AirAsia will buy 49% of Batavia, the maximum allowed under Indonesian regulations, and Fersindo will take the remainder. Fersindo owns 51% of PT Indonesia AirAsia, the local unit of AirAsia.

Once the deal is final, Batavia Air and Indonesia AirAsia will carry more than 14 million passengers to 42 Indonesian and 12 international destinations, a company statement said.

“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 AirAsia Group Chief Executive Tony Fernandes.

Analysts say that while the Indonesian market is very competitive, there is still huge potential for growth in Southeast Asia’s largest economy, and that the Batavia buy should help AirAsia consolidate its position ahead of a proposed initial public offering in Indonesia.

For now, though, the Indonesia IPO will be postponed, Fernandes said at a news conference. In June, AirAsia Indonesia President-Director Dharmadi said the airline hoped to raise about $200 million by selling up to 20% of its shares in a Jakarta offering in the fourth quarter.

“AirAsia is strong on the international side while Batavia is a domestic player with access to strong distribution points such as travel agents,” said Ahmad Magfur, an analyst at OSK Research, commenting on the acquisition plan.

“It’s a big dream come true for me,” Fernandes tweeted, referring to the complementary strengths of the two airlines.

Last month, AirAsia set up its regional headquarters in Jakarta, which it plans to use as a base to expand elsewhere in South East Asia, where demand for travel has been strong.

The higher disposable incomes of the region’s growing middle class has kept the aviation business, and particularly the budget end, buoyant.

Industry researcher PhoCusWright forecasts low-cost airlines’ passenger revenues in the region will grow 23% in 2012, versus 8% for full-service airlines.

Indonesia AirAsia started international flights out of Indonesia last year. It is the biggest player on international routes, with a market share of 41.6%, and carried 3.38 million passengers in 2011, government data show.

Batavia’s strength is in the domestic market, in which it took a share of 11.25%. The airline serves more than 50 routes across Indonesia and Asia and had a 3.6% market share in the international flight segment in 2011.[]

Fox Business

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