Berjaya Air may go it alone

PETALING JAYA - Tan Sri Tony Fernandes and Tan Sri Vincent Tan have big plans to capitalise on Subang SkyPark - Kuala Lumpur's city airport - to offer scheduled business class jet services within the region.

Either they join hands or offer services separately, they are both keen to get into the business. But such a move will put pressure on margins for airlines operating in the country.

The first time the tycoons discussed this was in 2011. But at that time, they could not hammer out a deal. Recently, talks have swirled again that they have come back to the negotiation table.

It is, however, unclear if a deal is in sight but the market is speculating that Fernandes' Caterham Jets will take a 51 per cent equity stake in Berjaya Air and now it is up to the authorities to give their blessings.

Caterham Jets, owned by Tune Air, which in turn is owned by Fernandes and his business partner, Datuk Kamarudin Meranun, was set up two years ago. But it has not been able to secure an Air Operator's Certificate (AOC) and thus the tie up will give it an edge to set up a base in Subang.

Whether both parties are working together is unclear, but what seems clear is that Berjaya Air is revisiting its own plans.

It wants to set up its own business class jet services, regardless of whether it can get a partner or not.

It has hired Datuk Eddy Leong, the former CEO of Firefly to spearhead its business class jet operations.

The airline may begin operations as early as March next year, those in the know claimed.

Berjaya Air now operates flights to Redang, Tioman, and several other spots. With the review, it is suspending its flights to non-island spots such as Hua Hin, Pangkor, Langkawi, and Penang because it is losing money on these operations. In fact, those in the know claimed that it has been transfering its passengers to Malindo Air and Firefly. However, it will only focus on island destinations such as Redang and Tioman.

Tan has some business jets that will be used for the operations and the airline will buy new ones and is said to be in talks with Bombardier for that.

For its turboprop operations, it has three Dash and two ATR72 aircraft.

Berjaya Air is a unit of Berjaya Vacations Club, which in turn is a unit of Berjaya Land Bhd. The group is controlled by Tan.

Though Berjaya Air may have its own plans, market observers do not preclude that a deal may be struck with Caterham Jets and that will augur well for both Tan and Fernandes.

"One needs the expertise and the other the AOC, it will be to their advantage," they said.

Caterham Jets was set up about two years ago to offer "super-premium" services in Asia using two Bombardier CRJ700 initially, to be later expanded with six more aircraft to serve the region to destinations such as Jakarta, Bangkok and Singapore.

However, it has not been able to secure an AOC to do so, and hence the proposed joint venture with Berjaya Air.

Caterham Jets' initial plan is to fly domestic points within the country and also Singapore. It will gradually offer scheduled business class flights to Bangkok, Jakarta, Hong Kong and even Shanghai from Subang SkyPark.

The entry of Caterham Jets would certainly cause ripples in the market and heighten competition. Whilst it would be good for passengers, as there would be more choices, the airlines would have to slug it out for passengers . There is a huge business class market that would prefer to fly out of Subang SkyPark compared with the KL International Airport.

Fernandes, Kamarudin and Leong could not be reached for comment.