Malaysia Airlines (MAS) and AirAsia announced late this evening the cancellation of plans for a share swap between the two carriers.

However, despite that the termination of the share swap, the agreement to work together stay.

AirAsia said in a statement to Bursa Malaysia that it has separately entered into memorandums of understanding with MAS in respect of the following:

a) to jointly explore the setting up of the joint-venture company by AirAsia, MAS and AAX (AirAsiaX) to provide aircraft component maintenance support and repair services;

b) to establish the broad set of business principles for the proposed establishment of a special purpose vehicle by AirAsia, MAS and AAX to improve value for money and increase competitiveness and benefits to customers through procurement synergies by outsourcing to the SPV (special purpose vehicle) the procurement processes for identified goods and services in agreed categories.

The shares of both airlines were suspended from trading earlier today pending the corporate announcement.

The proposed US$364 million (RM1.1 billion) tie-up has encountered strong resistance from the 20,000-strong MAS union, which voiced concern that the deal resembled a takeover by AirAsia founder Tony Fernandes and his brand of aggressive cost cutting.

Nominee directors to resign

Under the deal, Khazanah would get a stake in AirAsia, while Tune Air, which owns 26 percent of AirAsia, would get a stake in Malaysia Airlines.

The aim of the deal was for the two airlines "to cooperate on a broad range of areas so as to leverage on their respective core competencies and optimise efficiencies". 

The unwinding of the share swap will see Tune Air transfer its 20.5% stake in MAS back to Khazanah, while Khazanah will transfer its 10% stake in AirAsia back to Tune Air, said Tune Air director Kamarudin Meranun.

"We continue to believe in the ability of the collaboration to create value for all shareholders and ultimately to benefit passengers," he said in a statement.

"Furthermore, we feel that the collaboration will enable all three companies to be better prepared in facing in a more competitive environment following the implementation of the Asean Open Skies framework." 

He said that the nominee directors of Tune Air on MAS' board of directors and Khazanah's nominee director on AirAsia's board will resign immediately.