Mainboard-listed Sats and Malaysia's low-cost carrier AirAsia have signed an agreement that involves the two firms owning an interest in each other's ground-handling units as they expand services across the region.
Sats will acquire a 50 per cent stake in AirAsia's Ground Team Red Holdings (GTRH) in exchange for its 80 per cent stake in Sats Ground Services Singapore (SGSS), along with $119.3 million in cash, Sats said in an announcement to the Singapore Exchange.
SGSS is a new entity formed to serve customers at Changi Airport's Terminal 4.
GTRH will be renamed Sats Ground Team Red Holdings, which will be the 50:50 joint investment vehicle of AirAsia and Sats. It will hold stakes in both its Malaysia and Singapore subsidiaries - Ground Team Red (GTR) and SGSS.
AirAsia will effectively own 51 per cent of GTR and 40 per cent of SGSS while Sats will effectively own 49 per cent of GTR and 60 per cent of SGSS.
Both companies will be responsible for growing the ground-handling business in their respective markets and will explore expansion into Indonesia, the Philippines and Thailand soon, they said in a joint announcement yesterday.
The new partnership will give Sats, which already owns a 4 per cent stake in the largest flight caterer in Malaysia, Brahim's Sats Investment Holdings, access to the Malaysian ground-handling market, said Sats.
Sats president and chief executive Alex Hungate said the expanding fleet size - with 41 per cent of the demand for new aircraft over the next 20 years coming from the Asia-Pacific - represented a huge opportunity for the firm, so it was happy to partner AirAsia in the joint venture.
The partnership with Sats will foster greater efficiency and cost savings for AirAsia's ground-handling operations, AirAsia said in a filing to the Malaysian stock exchange.
"This will facilitate growth of AirAsia, with Sats bringing in the necessary expertise and skills set to create a synergy which will enhance the ground-handling business," it added.
The Malaysian-listed carrier said it expects the transactions to result in a disposal gain of RM365.7 million (S$118 million) in the fourth quarter of the 2017 financial year.
Sats shares closed up three cents or 0.6 per cent to $4.69 yesterday. The announcement was made after market close.