July 26, 2012
AirAsia is buying Indonesia’s fourth largest carrier, Batavia Air, a move that will make AirAsia the third largest airline group in Indonesia and increase competition against Garuda Indonesia and Lion Air.
An AirAsia Indonesia spokeswoman confirmed to Aviation Week today (July 26) that AirAsia is buying Batavia but she declined to disclose details of the deal. She says a press conference is due to take place later today in which AirAsia CEO, Tony Fernanades; Indonesia AirAsia CEO, Capt. Dharmadi; and Batavia Air owner, Yudiawan Tansari, will disclose the details.
There are some synergies between Batavia Air and AirAsia because both are low-cost carriers that operate Airbus A320-family aircraft.
Fernandes recently relocated to Jakarta from Kuala Lumpur with a remit to grow Indonesia AirAsia, which is a distant fifth in the Indonesian airline market behind Lion Air, Garuda Indonesia/Citilink, Sriwijaya Air and Batavia Air.
Indonesia AirAsia is also planning an initial public offering in next year’s first quarter. Fernandes has said publicly that Indonesia AirAsia should be larger than it is, considering Indonesia is Southeast Asia’s largest aviation market.
Indonesia AirAsia today is relatively small, with a fleet of only 18 A320s. Batavia Air has a fleet of 34 aircraft comprising of six A320-family aircraft, two A330s, 15 Boeing 737-300s, 10 Boeing 737-400s and one Boeing 737-500. Batavia used to have more aircraft but recently returned some to lessors before the leases expired. It is negotiating with International Lease Finance (ILFC) to break its 10-year lease on the two A330s.
In recent times Batavia Air has struggled, which is why it has been downsizing. Prior to today’s announcement, some executives at other airlines in Indonesia were predicting that the Tansari family, which controls Batavia Air, may look to exit the business.
Batavia Air, however, is still a sizeable carrier, so it is of value to AirAsia. Besides increasing AirAsia’s fleet size and presence in Indonesia, the purchase gives it all of Batavia Air’s landing slots, a valuable commodity considering some of the busier airports in Indonesia are no longer issuing new slots at peak times, due to capacity constraints at the airport.