MAS/AAX (Merging Very Unlikely)

 Industry observers opine that the rumors of a merger between MAS and Airasia X are a long shot.

The reason being one weak airline plus another weak airline would equal to one very weak airline. There are also lack of synergy benefits and the fact that the two airlines are already struggling on their own.

Mergers are never easy as they require significant management time and endless hours by the mid management and it is something both companies can ill afford currently (July 2014).

MAS-AAX merger would bring minimal, if there is any, synergies. The two airlines fleet are vastly different and so do their systems …

Furthermore, MAS is bounded by the OneWorld Alliance requirements in terms of the business structure.

MAS is struggling and is battling to stay alive. AAX is making losses and has yet to turnaround. Furthermore, it is highly indebted and its free cash balance is quite low.

Nonetheless, the possible reasons for MAS and AAX to undergo a merger would be to push for higher yields, share data and perform collective capacity management yet doing so would be anti competitive and could invite another reprimand from MYCC.

Earlier it was speculated that Airasia X and MAS may merge.

Should this merger happen, this would be the second attempt by Tune Group and Khazanah Nasional Bhd since the failed share swap between MAS and Airasia Bhd in 2012.

A merger is said to be negative to Airasia X as MAS issues are in relation to its high costs. Thus having a merger would not benefit AAX, as the issues would not solved easily.

MAS’ long term borrowings stood at rm10.34 billion while its short term borrowings was at rm1.47 billion. Netting off its cash and bank balances of rm3.38 billion, MAS’ debt was 2.41 times its equity of rm3.5 billion.

Khazanah Nasional Bhd is the only shareholder which owns more than 5% of MAS or 11.59 billion shares or 69.37% of equity stake.

Both AAX and MAS do not fared well either in terms of financial results.

AAX had a gearing level of 1.63 times after deducting its cash worth of rm131.96 million. The group’s earnings retained earnings were in a deficit of rm1.25 million.

Tune Group Sdn Bhd has a 17.83% stake and Airasia Bhd has a 13.76% stake are the two largest shareholders of AAX.