The acquisition of PT Metro Batavia, the owner of ailing carrier Batavia Air, by Malaysia-based low-cost carrier AirAsia Berhad and its Indonesian partner Fersindo Nusaperkasa, has been called off.

Batavia commercial director Sukirno Sukarna, who confirmed the cancellation, said that the company had failed to reach and agreement with AirAsia and Fersindo.

English daily The Jakarta Post today quoted Sukirno as saying that AirAsia and Fersidno are expected to disclose the details of the failed negotiation today.

AirAsia and Fersindo signed a memorandum of understanding (MoU) with the domestic carrier at the end July to buy PT Metro Batavia, including its flying school, worth US$80 million (RM256 million).

Under the agreement, AirAsia Berhad will have owned 49 percent of Metro Batavia while Fersindo will hold the remaining 51 percent in order to meet Indonesian ownership rules.

Meanwhile, AirAsia said the diverse nature of the two businesses has prompted an alteration to the initial agreement.

“The precise scale of integration including a re-fleeting exercise and streamlining an amalgamation of cultures are expected to take up considerable time, effort and joint resources which can be more efficiently utilised in a targeted manner,” the frills-free carrier said in a statement.

Commenting on the decision, AirAsia Group chief executive officer Tony Fernandes, said: “We always knew it was not going to be an easy transaction.

“It has been a very good experience and we come out of it feeling more confident of what we need to do to grow the market in Indonesia.

“Our aggressive focus in Indonesia remains and we will push our Indonesian initial public offering plan while still maintaining close cooperation with Batavia Air.

“The company’s decision was based on a thorough evaluation by many parties into Batavia Air.

“On our minds, the timing was perhaps not appropriate as it would have induced too many risks and would ultimately be earnings dilutive to our shareholders.”

Multilateral collaboration agreement

Batavia Air managing director Alice Tansari said all parties worked very hard to realise this transaction.

“Ultimately what matters is for both airlines to continue to provide the best service and choices for Indonesian travellers and our collaboration agreement will help to support that,” she said.

She said the proposed tie-up between the parties has been reorganised as a multilateral and multi-phase collaboration agreement, encompassing ground handling, distribution and inventory systems.

A separate aviation training joint venture with classroom, fixed-wing and simulation training facilities will be immediately established between Batavia Air and PT AirAsia Indonesia to address an expected skilled pilot shortage in Indonesia, she said.

She said the new collaboration agreement is expected to deliver many of the intended benefits of an acquisition and AirAsia, Fersindo and Metro Batavia Group are unanimously aligned to deliver the identified operational alliances, which will mutually grow AirAsia Indonesia and Batavia Air’s businesses.

Both airlines will continue to operate as normal and focused, an accelerated fleet growth in Indonesia remains a key priority for AirAsia, she added.

AirAsia Indonesia chief executive officer Dharmadi said the airline will accelerate its fleet expansion starting from 2013 onwards.

“We are looking to more than triple our fleet size in the next five years to accommodate an average annual passenger growth rate of 24 percent and 28 percent in international and domestic markets, respectively.

“We will continue to strengthen our network by adding more hubs and developing our services to Eastern Indonesia.

“In an effort to stay ahead of the curve, AirAsia Indonesia will also upgrade its sales and distribution system, provide differentiated services while implementing dynamic pricing strategies,” he added.

- Bernama