KUALA LUMPUR (Nov 29): AirAsia X Bhd (AAX) has proposed to acquire Capital A Bhd’s aviation arm through AirAsia Bhd (AAB) and AirAsia Aviation Group Ltd (AAAGL), as part of its regularisation strategy to uplift itself from Practice Note 17 (PN17) status.

This confirmed The Edge weekly report on Nov 7, quoting sources, that the low-cost carrier AirAsia may merge with its medium-haul affiliate AAX as part of the restructuring of Capital A, which is also a PN17 company.

In a statement on Tuesday (Nov 29), AAX said it is formulating a regularisation plan that involves the merger with AAB and AAAGL, which has shareholdings in AirAsia Indonesia, AirAsia Philippines and AirAsia Thailand, as part of the carrier's bid to uplift its PN17 status.

“Following the acquisition, AAB, AAAGL and AAX will form a consolidated aviation group, subject to the approval of our stakeholders and relevant regulatory authorities,” said AAX chief executive officer Benyamin Ismail.

Earlier this month, AAX had obtained an extension of time by Bursa Malaysia to submit the plan by April 28 next year.

AAX expects to announce the regularisation plan to Bursa Malaysia in January 2023, followed by official submission for approval thereafter in February.

AAX has engaged AmInvestment Bank Bhd, Messrs Mah-Kamariyah & Philip Koh, Deloitte Corporate Advisory Services Sdn Bhd, Messrs Ernst & Young PLT, Smith Zander International Sdn Bhd, and BDO Governance Advisory Sdn Bhd to advise on the various aspects of the plan to regularise its PN17 status. 

Benyamin said AAX’s potential acquisition of the short-haul airlines under one consolidated group will create synergies with existing mid-range operations, although all airlines under the consortium will remain separate with regard to the operations.

“Leveraging the group’s wide network of over 130 destinations will provide us the opportunities to expedite our recovery after the completion of the regularisation plan.

“The strategy is not only expected to strengthen our balance sheet and cash flows but create value for the company as well as our shareholders in the longer term,” he added.

Subject to receiving the requisite approvals necessary for the proposed regularisation plan, including from AAX board of directors, Bursa, AAX shareholders and other relevant authorities, AAX expects to complete the implementation of the regularisation plan by July next year.

According to The Edge report, the spin-off of its airline business will leave Capital A with its non-aviation digital assets, such as the airasia Super App, logistics venture Teleport, BigPay fintech service and venture arm Redbeat Capital.

AAX triggered the criteria for PN17 classification in October 2021 after its external auditors, Messrs Ernst & Young PLT, expressed a disclaimer of opinion in the airline’s audited financial statements for the 18-month financial period ended June 30, 2021.

AAX had a cash balance of RM79.5 million as at Sept 30, 2022, more than tripled that of RM25.1 million in the preceding quarter.

Shares of AAX closed 1.5 sen or 3.5% higher at 44.5 sen per share on Tuesday, giving it a market capitalisation or RM184.59 million. Capital A, meanwhile, closed 3.5 sen or 6.25% higher at 59.5 sen per share, valuing it at RM2.48 billion.
  

https://www.theedgemarkets.com/article/airasia-x-seeks-merge-capital-aviation-arm-airasia-confirms-edge-report