Ex-Air Canada CEO takes stake in AirAsia X

[Sri Ramani K. 0]

http://www.btimes.com.my/Tuesday/Latest/amcanada.xml

 

AIR Canada's former chairman and chief executive officer, Robert Milton, has joined the list of AirAsia X's prominent international shareholders after acquiring a stake in parent company Aero Ventures Sdn Bhd.

 

His less than five per cent share in Aero Ventures, which owns 48 per cent of the long-haul budget airline, is estimated to be worth some RM28 million, based on the airline's current value of RM1.2 billion.

 

AirAsia X chief executive officer Azran Osman-Rani said that having Milton on board will contribute to its business as it can capitalise on the latter's vast expertise and knowledge of the industry.

 

Milton's participation will also serve as recognition of foreign investors' growing confidence in AirAsia X's business model, he added.

 

"Robert brings us the credibility and experience. This is indeed valuable for a start-up company like AirAsia X as it will give financiers more confidence in our business," Azran told reporters in Kuala Lumpur yesterday.

 

Aero Ventures is a holding company founded by Datuk Seri Kalimullah Hassan, AirAsia Bhd chief executive officer Datuk Tony Fernandes and deputy chief executive officer Datuk Kamarudin Meranun, and Lim Kian Onn to invest in aviation ventures.

 

Other shareholders in AirAsia X include Sir Richard Branson's Virgin group (16 per cent), AirAsia (16 per cent), Manara Consortium (10 per cent) and Orix Corp (10 per cent).

 

Milton said he was excited to be part of an airline that will revolutionise air travel.

 

"What attracted me to this proposition was the fact that AirAsia X is the first truly low-cost long-haul carrier, with its base in Malaysia and focused on the Asia-Pacific region, that holds great promise and to which I have strong personal ties," he added.

 

Milton is the chairman and chief executive officer of ACE Aviation Holdings, which owns 75 per cent of Air Canada. It also holds stakes in publicly-listed Aeroplan, a loyalty management company, and Jazz, Canada's second largest airline.

 

ACE Aviation also has an interest in ACTS - an aircraft maintenance, repair and overhaul (MRO) organisation - in partnership with KKR and Sageview.

 

Milton, regarded as one of the world's most experienced aviation executives, is best known for his successful restructuring of Air Canada.

 

On AirAsia X's listing plans, Azran said it expects to undertake the exercise within two to three years, adding that it would prefer to list in Malaysia.

 

"We would prefer to be listed on Bursa Malaysia. I believe that the investment climate in Malaysia has matured," he said.

 

there were indications earlier about the A345s being leased from AC, will it happen now amidst talk from some that the 346 could also come from CX?

[Mohd Azizul Ramli 2]

Interesting news. Now AirAsia X (D7) is, in a way, being co owned by Malaysia (49%), Britain (16%), Bahrain (10%), Japan (10%) and Canada (5%). If these shareholders insist that D7 must fly to the respective countries, it will be interesting to see the sustainability, especially to Canada and Bahrain.

 

Canada simply because it is too far, which requires a one stop service or operates using ULH capable aircrafts, which is not quite suit D7's business model. BAH on the other hand will be having a tough time in luring D7 to the airport because AUH is lobbying very hard to get them to fly there. At the same time, JXB is building a super mega LCC terminal in Dubai's newest gateway. Very interesting to see the outcome.

 

I think the news doesn't have anything to do with D7's intention to lease 2 long haul capable widebody aircrafts. Just my speculation.

Edited March 25, 2008 by Mohd Azizul Ramli

[Mohd Azizul Ramli 2]

Another related article from The Star, Tuesday March 25, 2008.

 

Air Canada group chief invests in AirAsia X

By C. S. TAN

 

KUALA LUMPUR: Robert A. Milton, chairman and chief executive officer of Ace Aviation Holdings Inc, parent company of Air Canada, is an investor in AirAsia X Sdn Bhd, and advising it as it charts a course as a low-cost, long-haul carrier. Milton, who was CEO of Air Canada from 1999 to 2007, said he owned “a very small piece of Aero Ventures Sdn Bhd”, which holds a 48% stake in AirAsia X.

 

He is a founding shareholder of Aero Ventures although this was not revealed by the company until yesterday. Milton invested in his personal capacity with the approval of the Ace Aviation board. Although Air Canada is a full-service airline, Milton told the media here yesterday that he could advise AirAsia X. “I know where the pitfalls are in the long-haul business,” he said.

 

Furthermore, Air Canada is an innovative airline group. Its frequent-flyer programme, a cost centre for other airlines, was formed into the Aeroplan Income Fund and spun off and listed on the Toronto Stock Exchange. Aeroplan, with a market value of RM9.6bil, had a larger market cap than many airlines, he said. Ace Aviation, which owns 75% of Air Canada, holds a 20% stake in Aeroplan.

 

Air Canada sells seats to Aeroplan, and while the banks pay the airline on day one, the points “live” for 30 months. However, 17% of that didn't get used, he said. When Milton led Air Canada, he looked at ways for the 70-year-old airline to operate differently. “We pursued a low-cost approach. For our domestic routes, 65% of sales are made on the Internet. That's extraordinarily high for a full-service airline,” he said. The airline is also transparent with its charges for the choices passengers make. “If you want food, you pay for it. If you don't have check-in luggage, we give you a C$3 discount,” he added.

 

He will also be helping AirAsia X source for long-haul aircraft. AirAsia X chief executive officer Azran Osman-Rani said the airline had just one leased plane but would have three by the end of the year. These would be for regional routes and he is looking to lease an Airbus A340 for the London route.

 

Azran said he was thrilled to have Milton on board AirAsia X as the latter had so much experience for the fledgling airline to capitalise on. AirAsia X was able to make share placements at a good valuation partly because of the participation of the Virgin group and Milton, he said. “Ultimately, billions of dollars of debts will be required for aircraft financing and the banks will want to see a company that is well guided, well advised,” he added.

 

Aero Ventures' founding shareholder Datuk Tony Fernandes said he was against in-flight entertainment systems, even on long-haul flights, but after looking at how Air Canada charged for that, it was being considered. AirAsia X, which started flying last November, “is already profitable, with a net income of RM300,000 last month,” he added.

 

* * * * *

I think the points highlighted in BLUE will be modified and implemented by D7.

[Walter Sim 1]

Huhuhuhu times are good for D7 eh?

 

Can't wait til they fly to London!!