AirAsia 'seeks control' of rival Malaysia Airlines

KUALA LUMPUR: Fast-growing budget airline AirAsia is pushing for management control of loss-making rival Malaysia Airlines under a reported share swap, a source with knowledge of the deal told AFP Monday.

Trading in the shares of national flag carrier Malaysia Airlines and Malaysia-based AirAsia was suspended on Monday following press reports that the swap could give the latter a 20 percent stake in its rival.

But AirAsia is arguing in ongoing talks that obtaining management control is "the key" in the deal, which is reportedly aimed at turning around struggling Malaysia Airlines, said the source, an industry official who spoke on condition of anonymity.

An announcement on the plan could be made as early as Tuesday, said the official, who added the size of the stake could be up to 30 percent.

AirAsia is run by Malaysian tycoon Tony Fernandes, who acquired the former government-linked airline a decade ago when it was struggling to make an impact.

He has since turned the no-frills carrier into one of the aviation industry's biggest success stories, rapidly expanding its route system over the years and undercutting Malaysia Airlines with its bargain airfares.

Analysts welcomed reports on the plan, saying a tie-up could benefit both carriers, with AirAsia's low-cost regional routes complementing more up-market Malaysia Airlines' long-haul system.

After taking office in 2009, Prime Minister Najib Razak embarked on an ambitious programme to overhaul the economy and public sector, including selling off stakes in troubled state-owned companies to help spur growth.

Malaysia's state investment arm, Khazanah Nasional, currently owns close to 70 percent of Malaysia Airlines.

While refusing to comment on the reported swap, both Khazanah and Fernandes have said that it would not see AirAsia become the single largest shareholder in Malaysia Airlines.

The official said AirAsia was approached by the government in recent months about a tie-up with Malaysia Airlines.

Malaysia Airlines recently said it aims to claw its way back into the black with an $8.4 billion fleet renewal plan to meet competition from budget carriers and high-end rivals alike.

It is not clear how much of a stake Malaysia Airlines would gain in AirAsia as part of the deal.

Copyright AFP (Agence France-Presse), 2010