AirAsia Enhances Filipino Penetration with Zest Air Alliance

Fast expanding low-cost venture AirAsia is to grow its activities in the Philippines after agreeing terms with the majority shareholder of Zest Air Group to acquire a 49 per cent share of the common stock of Zest Airways and 100 per cent of Asiawide Airways.  Through this strategic alliance, which still has a number of regulatory hurdles to pass before completion, AirAsia’s local joint venture, Philippines’ Air Asia, will be able to significantly expand in the local market without impacting resource growth across other businesses in the group.

Under the terms of the agreement with Ambassador Alfredo Yao, the majority shareholder in Zest Air Group, Philippines’ AirAsia will acquire the equity interest in the two operators, and, in turn, Amb. Yao will subscribe to shares in the low-cost carrier.  To further strengthen this partnership, the shareholders of Philippines’ AirAsia will “infuse funds to augment working capital,” according to a company statement.

“Today's strategic alliance between our two local carriers brings pride and joy to Philippines' AirAsia.  I am especially delighted to have Amb. Yao of Zest Air as a partner as he shares a common vision to provide passengers with the best value fare possible which enables them to fly to various destinations,” said Marianne Hontiveros, Chief Executive Officer, Philippines' AirAsia.

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Marianne Hontiveros
Chief Executive Officer, Philippines' AirAsia

“This proposed investment in the Zest Group will complement the strategies for future growth of Philippines' AirAsia, which currently operates out of Clark.  This will allow us to leverage on our respective strengths, which in the case of Zest Air, include its operations out of the Ninoy Aquino International Airport, which constitutes a majority of the air traffic in the Philippines, and a strong domestic network which feeds into its current international routes,” she added.

The investment of PAA in Zest Air also aligns with AirAsia Group’s business strategy.  The AirAsia Group consists of existing operations in Malaysia, Thailand, Indonesia, Japan, the Philippines and, with India to come, altogether making AirAsia the largest Asian low cost carrier, with a combined fleet of 120 aircraft, plus over 350 more on order, and operating over 158 routes spread across 18 countries, of which 56 are unique.  

AirAsia has said on a number of occasions that it sees enormous growth potential in the Philippines, especially with a population of over 100 million people across an archipelago of just over 7,000 islands, a landscape conducive to air transportation.  In a tweet ahead of the confirmation of this deal, the airline group’s founder, Tony Fernandes said: “Big day and statement of intent in Phillippines for AirAsia in our ASEAN dream”.

The alignment of the strategies of Philippines' AirAsia and Zest Air will support the carriers’ common vision to widen the choice of low cost travel within the Philippines and the region.  “The goal in Zest Air is driven by my passion to capitalise on the tourism potential and, hence, our investment to quickly increase our fleet and expand Zest’s market share," said Ambassador Alfredo Yao.

An analysis of last year’ flight schedules shows that the two carriers had a combined 11.8 per cent share of the domestic capacity in the Philippines (Zest Air: 10.5 per cent; Philippines AirAsia: 1.3 per cent) and a 3.1 per cent share of the international market from the country (Zest Air: 2.2 per cent; Philippines AirAsia: 0.9 per cent).  These figures are still considerably below the numbers of Cebu Pacific (43.2 per cent), airphil express (23.5 per cent) and Philippine Airlines (19.6 per cent) in the domestic market and Philippine Airlines (25.4 per cent) and Cebu Pacific (16.7 per cent) in international skies.

In the domestic market, Phillippines’ AirAsia’s focus at Clark International Airport and Zest Air at Manila’s main gateway at Ninoy Aquino International Airport means their networks are complimentary, while in international skies the two airlines also show no cross-over of activities.  In this market Philippines’ AirAsia currently offers flights from Clark to Hong Kong, Kuala Lumpur, Macau, Singapore and Taipei, while Zest Air flies from Cebu to Seoul Incheon; Kalibo to Busan, Seoul, Shanghai and Taipei; Manila to Seoul, Shanghai and Quanzhou and a sole route from Clark to Busan.

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