Capital A positive about higher returns this year
PETALING JAYA: Capital A Bhd is confident of delivering improved returns and profitability to shareholders in 2024.

In a letter to shareholders via a Bursa Malaysia filing yesterday, chief executive officer Tan Sri Tony Fernandes said he remains hopeful of a downtrend in jet fuel prices by year-end, despite it rising in the first quarter amid continuing global geopolitical turbulence.

“I am also optimistic of a favourable shift in the US dollar against key Asean currencies, which alongside market expectations of further interest rate cuts in 2025 would be a significant boon for us, given that 70% of our costs are denominated in dollars.

“Regionally, we continue to track geopolitical risks but I do not expect these to affect our operations in 2024. Our airline’s post-pandemic recovery has been robust and diverse, spread across multiple markets, a trend we plan to continue.”

Last week, Capital A proposed a restructuring plan to dispose of its aviation operations to AirAsia X Bhd (AAX) for a consideration of RM6.8bil, which will help the group exit its Practice Note 17 (PN17) status. Subsequently, AAX will be acquired by a newly established entity named AirAsia Group (AAG).

While the proposed disposal of the aviation business undergoes its due process, Fernandes said Capital A remains committed to unlock meaningful shareholder value across its five verticals, namely, lowest cost, financial sustainability, high performance culture, superior products and great customer service.

“Our immediate goals are to reactivate all remaining aircraft from Covid-19 storage to operations and to resolve our PN17 status. Achieving these goals will pave the way for aggressive growth across all verticals, maximising value and returns for our shareholders – our top priority always,” he said.

In the larger picture, Fernandes said the restructuring would mean that all AirAsia-branded airlines are now in a single entity.

“We will formally become the largest low-cost airline in Asean, which will elevate our brand visibility and allow us to deliver more value to our passengers.

“We expect this move to improve our fleet, network, schedule and revenue management efficiencies due to the enhanced scale of operations.”

Fernandes added that it will be a win-win proposition for both Capital A and AAX shareholders. “From the Capital A perspective, this proposed divestment is all about growth. Our ambition is to build a low-cost carrier network to rival what we see from the likes of Emirates and Qatar Airways – a profitable, low-cost version.

“The plan is to progressively phase out other aircraft as we replace them with A321LRs and A321XLRs, creating a single-type fleet that can reach the entire world, either directly or with one-stop.”

Over the next five years, Fernandes said the plan is to leverage this new range into connecting Asean to Europe, Africa, Central Asia and North America.

“While we have already connected Asean to Asia, we can deepen that network significantly with this new aircraft. My dream is that we would be reaching every continent by the time I retire in five years’ time.”

From the AAX perspective, Fernandes said this proposed transaction is also all about growth. “As things stand, AAX cannot grow at a time when its competitors are expanding. AAX is on the precipice of critical stagnation at a time when post-pandemic travel recovery tailwinds are fuelling the growth of its competitors.”

Post-restructuring exercise, Fernandes said he also expects to achieve cost savings by consolidating the engineering and ground-handling contracts.

“This move is expected to utilise the combined negotiating power and operational efficiencies of a larger entity. Through such strategic consolidation, we will strive to reduce costs and improve our financial management, allowing us to potentially provide more competitive pricing for our customers.”

Fernandes said an essential pillar of the proposed exercise is optimising the group’s human capital management. “This will involve further integrating our employee base to reinforce a shared corporate culture and operational goals.

“We will plan for targeted training and development, aligning roles and responsibilities to drive high productivity and service excellence, which in turn contributes to operational resilience and an enhanced customer experience,” he said.
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Capital A Bhd is confident of delivering improved returns and profitability to shareholders in 2024.