AirAsia to Buy Batavia Air for $80 Million

AirAsia

AirAsia (AA) has agreed to buy a 100 percent stake in Batavia Air, the two airlines said yesterday.

Currently the largest budget carrier in Indonesia, AirAsia will pay $80 million for Batavia, which is also based in Indonesia.

AirAsia CEO Tony Fernandez has said previously he was against acquisitions, calling them “value destroying”, but he has obviously changed his mind…and feels he needs to grow his airline to take on Indonesian airline Lion Air:

“This is the way for us to expand our business in Indonesia. Lion Air is big and if we’re not big enough, then Lion Air can eat us,” Fernandes told a news conference in Jakarta. “Aviation is a hard business…hopefully this marriage is a good marriage.”

Batavia currently operates 33 aircraft on 48 routes, and has several more planes in storage.

Lion Air sees the value of the purchase in the exploding Indonesian airline sector:

“It’s an interesting move and it surely going to make the competition even tighter in an already competitive market,” Edward Sirait, a Lion Air director, told Reuters. “It also shows the recognition by foreign investors that Indonesia’s aviation market has a very huge potential.”

AA will buy 76.95 percent this year and the rest in 2013.

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