Bangkok--13 Dec--Centre for Asia Pacific Aviation Yesterday’s rumours that AirAsia might buy into Virgin Blue raise an intriguing scenario, just as European and American airlines are exciting themselves with the prospect of mergers and acquisitions in their own markets. And AirAsia’s statement to the Malaysian Borso yesterday fell somewhat short of an outright dismissal of the possibility — “AirAsia Berhad, having made due and diligent enquiry, wishes to state that AirAsia has no knowledge of the contents of the (media report) as quoted”. Virgin Blue’s current majority owner, with 62% of the equity, Toll Holdings, has publicly made very clear that it wishes to sell down its holding in the carrier, as the airline was not part of Toll’s core activity. Making the sale process harder is the fact that the original promoter and owner of the Australian airline prior to IPO still retains a 25% share. And that the promoter was Sir Richard Branson’s Virgin Group. Any majority owner with such a high profile (some might say high maintenance) minor partner will need to be very focused and, arguably, well-established if it wished to take a strategic route which was inconsistent with Virgin Group’s wider plans. Despite liquidating its majority holding in Virgin Blue at a tidy profit, Virgin Group remains very interested in the Australian market; Virgin Atlantic flies to Sydney, via Hong Kong, from London; it operates from the UK to the US West Coast and could easily link with next year’s startup “V Australia”, when that Virgin Blue subsidiary commences B777 service across the Pacific. AirAsia would be an obvious track for Toll’s merchant bank bloodhounds to follow. All the pieces fit. Well cashed up and already partnered with Sir Richard Branson’s Virgin Group in the Malaysian LCC’s long-haul offshoot, AirAsia X, music entrepreneur Tony Fernandes-led AirAsia would be an obvious target. And AirAsia has put its money where Australia is, by making its first route with AirAsia X an Australian one, from Gold Coast Airport to Kuala Lumpur. And Tony and Sir Richard see eye to eye, strategically, if not physically. But then, that could all be too easy and obvious. Branson/Frenandes are too canny to slip into a bidding process which sees Virgin Blue’s share price pumped. After all, Virgin had the opportunity to buy back into the Australian new world carrier when the price was well below today’s levels and Branson probably still regrets missing that chance. Then there is the difficulty of integrating two very different business models, between the world’s lowest cost LCC and one of the world’s highest cost "LCCs"... But hold your breath for the next exciting episode. The potential is made more significant because Australia’s open and very profitable domestic market offers the ideal base to establish a brand that can be exported across Asia — just ask Qantas. A combined AirAsia and Virgin Blue would be a massively powerful entity in the region, if linked with the Virgin brand and other Virgin operations.Note to editors:About Centre for Asia Pacific Aviation The Centre for Asia Pacific Aviation (CAPA) was founded in 1990 and built an international reputation as the leading specialist aviation consultancy in the Asia Pacific, the Indian Subcontinent and Middle East regions. Today the Centre’s extensive information, analysis and data services deliver thought provoking and reliable advice to aviation industry leaders every day. Become a CAPA Member and experience the remarkable benefits of access to the Centre’s unique insights and expertise — most leading aviation organisations already do! Visit the Centre’s websites... CentreforAviation.com Peanuts.aero IndiaAviation.aero MiddleEastAviation.aero ChinaAviation.aero Head Office, Sydney: Derek Sadubin, Chief Operating Officer Aurora Place, Level 4, 88 Phillip St Sydney PO Box N777, Grosvenor Place Sydney, NSW Australia 2000 Email: [email protected] Southeast Asia Regional Office: Richard Pinkham, Regional Director, Southeast Asia Email: [email protected] Indian Subcontinent and Middle East Office: Kapil Kaul, CEO Indian Subcontinent & Middle East Email: [email protected] UK/Europe Office: David Bentley, UK Associate Email: [email protected] North America Regional Office: Martti Raito, Regional Director, North America Email: [email protected] North Asia Representatives: Korea: Kyung-sup Lee. Email: [email protected] Japan: Reiko Sonoyama. Email: [email protected] More information is available on the Centre’s website: www.centreforaviation.com