AirAsia buys into Zest Airways, seeking growth in Philippines

MANILA - The Philippine unit of Asia's biggest budget airline AirAsia Bhd has agreed to acquire 49 per cent of small-scale regional carrier Zest Airways, as it moves to turn its Philippine business into a money-making operation.

AirAsia, which has moved aggressively into new markets and placed huge jet orders to build a modern fleet, said last month it wants to focus on its core Malaysian, Thai and Indonesia routes, then grow its Philippine and Japanese routes profitably.

Philippines AirAsia Inc, which is 40 per cent owned by Malaysia-listed AirAsia, will acquire the stake in Manila-based Zest Airways via a share swap. Both firms declined to give the value of the deal.

Zest has a fleet of only 11 aircraft, compared with AirAsia which has more than 100 in service and hundreds more on order.

Zest flies from Ninoy Aquino International Airport in Manila to other towns in the Philippines, plus Shanghai and Taipei.

Philippines AirAsia, which is 60 per cent owned by a Filipino group that includes Chief Executive Marianne Hontiveros and Antonio "Tonyboy" Cojuangco, competes with budget carrier Cebu Air Inc in the Philippines. As well as internal destinations, it runs daily flights to Kuala Lumpur and Kota Kinabalu in Malaysia.

"This strategic partnership is all about growing the market," AirAsia group CEO Tony Fernandes told reporters.

Zest's owner, Philippine businessman Alfredo Yao, will get a 15 stake in the AirAsia unit.

Last week the Indian government approved AirAsia's proposal to set up an airline jointly with the Tata group, paving the way for the first foreign carrier to enter the Indian domestic aviation sector.