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SATS, AirAsia tie up for bigger bite of Asia-Pac boom
IT is a well-grounded plan - the pact between Singapore's SATS and Malaysia's AirAsia to tap the prospects in ground-handling services in the region, in a move fuelled by airlines' fleet expansion to feed rising travel demand.
In a tie-up between Asia's largest ground handler, SATS, and largest budget carrier, AirAsia, the two firms will each own an interest in the other's ground-handling units - in one fell swoop giving both a reach into the other's turf.
Stitching that plan together is a share-swop agreement and a share sale agreement.
SATS will swop an 80 per cent interest in SATS Ground Services Singapore (SGSS) for an 11.4 per cent stake in AirAsia's Ground Team Red Holdings (GTRH); AirAsia will sell a further 38.6 per cent stake in GTRH to SATS for S$119.3 million in cash.
SGSS is a new ground-handling entity formed to serve customers in Changi Airport's new Terminal 4, while GTRH is the investment holding of AirAsia's airport-services businesses.
GTRH will be renamed SATS Ground Team Red Holdings. It will be the 50:50 joint investment vehicle of AirAsia and SATS, which will hold stakes in both its Malaysia and Singapore subsidiaries, namely Ground Team Red Sdn Bhd (GTR) and SGSS respectively.
AirAsia will effectively own 51 per cent of GTR and 40 per cent of SGSS; SATS will effectively own 49 per cent of GTR and 60 per cent of SGSS.
Both companies will be responsible for growing the ground-handling business in their respective markets and will explore expansion into Indonesia, the Philippines and Thailand, said the firms in a joint announcement on Monday.
The partnership will give SATS, which already owns a 49 per cent stake in the largest flight caterer in Malaysia, Brahim's SATS Investment Holdings Sdn Bhd, access to the Malaysian ground-handling market, said SATS.
SATS president and chief executive Alex Hungate said the expanding fleet size - with 41 per cent of the demand for new aircraft over the next 20 years coming from the Asia-Pacific - represented a huge opportunity for SATS, so it was happy to partner AirAsia in the joint venture.
AirAsia, in a filing to the Malaysian stock exchange, said the partnership with SATS will foster greater efficiency and cost savings to its ground-handling operations.
"This will facilitate growth of AirAsia, with SATS bringing in the necessary expertise and skill set to create a synergy, which will enhance the ground-handling business."
The Malaysian-listed carrier said it expects the transactions to result in a disposal gain of RM365.7 million (S$75.1 million) in the fourth quarter of FY2017.
Cash balance will increase by RM372.2 million following the sale, it added.
Both companies said that the agreements are subject to the fulfilment of certain conditions precedent.
SATS rose 3 Singapore cents or 0.6 per cent to close at S$4.69 on Monday.
AirAsia, listed on Bursa Malaysia, slipped 2 sen or 0.6 per cent to RM3.18.
Amendment note:An earlier version of this article stated that SATS already owns a 4 per cent stake in the Brahim's SATS Investment Holdings Sdn Bhd. The above article has been amended to reflect the changes.