Monday, October 21, 2013

AirAsia Philippines Seeks Controlling Interest of Zest Air

AirAsia Philippines is seeking congressional approval to increase its stake in Zest Air from 49 percent up to 51 percent.

airasia zest
Copyright Photo: Reonel Cordova/PPSG
Zest Air, which recently rebranded as AirAsia Zest, is presently majority owned by juice tycoon Alfredo Yao. According to Joy Caneba, Chief Operating Officer of AirAsia Philippines, the airline will need the approval of Congress in order to obtain the additional 2 percent interest in Zest Air.

"A franchise is also a law and there is a certain process that we have to go through in both houses of Congress," said Caneba. "The basic requirement is the intention to acquire more equity and the transfer of controlling interest. You have to inform Congress who will be acquiring and who will be transferring." She added that the airline has already submitted its corporate documents to the Committee on Franchise of the House of Representatives but that they have yet to reach the official inclusion in the agenda for Congress deliberation.

AirAsia Philippines hopes to obtain the approval of Congress by the end of the year. Meanwhile, the airline is pushing ahead with its rebranding of Zest Air into AirAsia Zest. The airline announced that it had obtained the permission of the Civil Aeronautics Board, Civil Aviation Authority, and Securities and Exchange Commission to roll out the new branding last week. "Effective last week, we were able to roll out a new brand, so Zest Air is now rebranded to AirAsia Zest," said Caneba. "With the Air Asia name on board, we feel that we are able to offer better service and convenience to the passengers. There will be a lot more product and services that will be rolled out in the next couple of months and years to come."

Caneba is anticipating an increase in passenger traffic under the new brand. "Zest has a very good brand but I think with the Air Asia name backing it up, that should give more leverage and comfort to the passengers. So, we expect an increase in traffic for both domestic and international routes. For 2013, we expect to grow at least 15 to 20 percent," said Caneba.

In spite of the decision to move forward with the new branding and obtain congressional approval of a share increase, Zest Air founder, Alfredo Yao, reported that he hasn't decided to sell just yet. But he added that anything is possible with regard to giving up his remaining controlling voting interest. "It depends on what we agree on," said Yao. "So there's the price and it has to be for the right reasons. But so far, I have not seen a proposal from AirAsia yet."

Given the need for Congressional approval of any possible deal, Caneba reiterated that the discussions are still informal. "The parties involved would submit the requirements once a final deal has been reached," said Caneba. "So far, it's still an informal discussion."

Yao may be holding out for a really good deal. With slots at a premium at Ninoy Aquino International Airport, it's a seller's market and AirAsia is unlikely to look anywhere else given its decision to temporarily suspend its operations at Clark.

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