AirAsia's China ambitions grounded

AirAsia, the biggest budget airline in South-east Asia, has failed to secure a deal with its China partners to tap the world's second-biggest aviation market.
AirAsia, the biggest budget airline in South-east Asia, has failed to secure a deal with its China partners to tap the world's second-biggest aviation market.PHOTO: BLOOMBERG

AirAsia Group's planned foray into China for a wider regional footprint has suffered a setback after South-east Asia's largest budget airline failed to secure a deal with its local partners to tap the world's second-biggest aviation market.

A preliminary agreement signed last year for a venture with China Everbright Group and the Henan government has lapsed and will not be extended, AirAsia said in a filing late on Thursday, without providing details. A spokesman for the low-cost airline did not immediately respond to an e-mail sent yesterday, a national holiday.

The collapsed deal would mean that China remains a crucial missing piece for AirAsia Group chief executive officer Tony Fernandes, who has been expanding in the region with affiliates in Indonesia, Thailand, India, Japan and Vietnam to tap an aviation boom.

The Malaysia-based company has ordered hundreds of planes worth billions of dollars from Airbus to meet its plans as the region's expanding economies make air travel more affordable.

The disclosure comes at a time when Malaysia's Prime Minister Mahathir Mohamad has been reviewing projects signed by his predecessor, risking Beijing's displeasure.

In July, his government suspended the East Coast Rail Link, which was being built by China Communications Construction Co with an estimated price tag of RM81 billion (S$27 billion).

During his campaign ahead of his polls win in May, he had criticised Chinese investment in his country. He also warned against new "colonialism" in Beijing last month during a visit designed to mend fences between the two nations.

AirAsia, Everbright and the Henan government entered into a Memorandum of Understanding on May 14 last year to discuss and negotiate a definitive agreement for the venture. The non-binding agreement was valid for 12 months.

The discount carrier had planned to invest in aviation infrastructure, including a dedicated low-cost carrier terminal at Zhengzhou airport and an academy to train pilots, crew and engineers, as well as maintenance, repair and overhaul facilities to service aircraft.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on September 01, 2018, with the headline 'AirAsia's China ambitions grounded'. Print Edition | Subscribe