Plato Capital in talks with AirAsia, Everbright Financial to set up budget airline in China

Plato Capital has signed an agreement with AirAsia, China's Everbright Financial Investment Holdings and Oxley Capital to establish AirAsia (China).
Plato Capital has signed an agreement with AirAsia, China's Everbright Financial Investment Holdings and Oxley Capital to establish AirAsia (China). PHOTO: REUTERS

SINGAPORE - Singapore-listed investment firm Plato Capital has signed an agreement with Malaysian-based AirAsia, China's state-owned Everbright Financial Investment Holdings and private equity firm Oxley Capital to set up a joint venture to establish a low-cost airline in China to be known as AirAsia (China).

Plato Capital, which is based in Kuala Lumpur, said in an exchange filing on Monday (Sept 25) that it has entered into a non-legally binding term sheet to discuss definitive agreements for the proposed joint venture. The term sheet is valid for 12 months from Monday.

Plato noted that China is one of fastest growing air travel markets in the world.

It said: "With rapid liberalisation and the gradual easing of travel restrictions, China's aviation market is experiencing remarkable growth. China currently ranks second after the US in terms of air travel passenger market and is set to overtake the US to become the world's largest aviation market by 2024 as more people take to the skies domestically and internationally.

"In the past five years, China passenger traffic has been growing at a remarkable rate of more than 10 per cent annually which is higher than the world forecast average growth rate of 4 per cent - 5.5 per cent annually."

AirAsia (China) would be the first potential foreign low-cost carrier to enter China, and stands to benefit as cheap travel is at an early stage of its development in China, Plato added.

The joint venture company will be incorporated in Zhengzhou in Central China and have its operating base there. Zhengzhou has plans to develop an "aerotropolis" - an industrial, commercial and logistics zone five times the size of Manhattan with the airport at its heart and strong local government support, Plato said.

Plato Capital stock closed unchanged at 11.2 Singapore cents on Monday with no shares changing hands before the announcement was made.