Could AirAsia’s ‘BIG’ loyalty programme be in the crosshairs for divestment?

The AirAsia Group’s restructuring over the years has meant a strong refocus towards a pure airline operation. The group has moved to create a single holding company, with emphasis on the ASEAN region, while divesting stakes in “non-core” ventures.


  • AirAsia is working to become a single, airline-focused entity;
  • Many non-core ventures have been sold, including AAE Travel, its leasing business and flight school JV;
  • Group CEO Tony Fernandes believes the share price of the company has been ‘held back’;
  • The company’s BIG Loyalty programme could be next on the agenda for divestment.

Most recently, on 14-Aug-2018, the AirAsia Group completed divestment of its remaining 25% stake in AAE Travel to the Expedia Group. AAE operates both Expedia and AirAsiaGo businesses across Asia. Expedia and the AirAsia Group formed AAE Travel as a joint venture in Mar-2011.

The divestment follows AirAsia entering binding agreements to sell its aircraft leasing subsidiary, Asia Aviation Capital, to BBAM Limited Partnership for USD1.18 billion. The BBAM consortium will acquire 84 aircraft and 14 engines under the deal, with AirAsia transferring 39 aircraft to date. AirAsia Group has also affirmed that it is “on schedule to complete the planned staggered disposals” of the remaining 45 aircraft and 14 aircraft engines.

AirAsia Group CEO Tony Fernandes discussed the mindset behind the sale. He said: “When we bought these planes, our gearing was high and some people could not see why we wanted to own these assets… This deal shows it was the right strategy as we have something of value to dispose [of] in return for cash and an equity relationship… while removing residual risks”.

Further to the divestments is AirAsia deciding to exit its flight school 50:50 joint venture with the global simulation and training provider, CAE – the JV referred to as Asian Aviation Centre of Excellence (AACE). According to Mr Fernandes, the company gained MYR168 million (USD43 million) in 4Q2017 as a result of the divestment, while the overall USD100 million transaction gave CAE full control over AACE’s three training centres in Ho Chi Minh City, Sepang and Singapore and a share of the Philippine Academy of Aviation Training in Manila, a JV between AACE and Cebu Pacific.

Fernandes has repeatedly said the company’s share price has been ‘held back’

Mr Fernandes has routinely argued that AirAsia Group’s share price should be valued higher.

“One of the reasons I think our share price has always been held back a little bit is that we have a complicated structure… We’ve done a lot in terms of cleaning it up, but now with the formation of AirAsia Group I’ve really got the currency to talk to various leaders to try and create a 100% owned ASEAN airline”, Mr Fernandes said. In late 2017 he also referred to AirAsia X as the “most undervalued airline stock in the world, just like AirAsia was”.

Mr Fernandes believes investors often did not factor in many non-core businesses in their financial assessment of the group. As a result, the AirAsia Group has committed to the biennial distribution of special dividends from the monetisation of its non-core assets.

With no target set for the end of special dividends, AirAsia’s ‘BIG’ Loyalty programme could be in the crosshairs

With special dividends from non-core assets set to be continually delivered to AirAsia Group shareholders, could AirAsia look to divest its ‘BIG’ Loyalty scheme?

Airline loyalty schemes have become a major part of many airline business – and are, in fact, sometimes the most profitable part. The question is whether AirAsia considers its loyalty business as core or non-core. Loyalty programme IPOs and divestment/investment schemes are being seen more and more in the wider aviation industry, with Air Canada, Virgin Australia and HK Express all participating in some form in recent times.

AirAsia’s aim is to grow loyalty members by 47% year-on-year to 2.5 million in 2018. The question is: is divestment the reason why it is targeting such ambitious growth?