Outside influences

Juliette O'Neill
By Juliette O'Neill September 1, 2016 09:12

Outside influences

AirAsia Bhd founder and chairman, Tony Fernandes, has reiterated his hopes to sell-off the company’s aircraft-leasing unit by December 2016 in a US$1bn (RM4.05bil) transaction following the approval by the AirAsia’s board to sell the unit. In an interview with Bloomberg TV, Fernandes said that there seems to be “tremendous interest”, adding that depending who the buyer is, AirAsia Bhd will “likely divest all or maybe keep a minority interest for a period and sell out,” Fernandes said. He also stated that some of the proceeds could be used as a dividend.

RHB Investment Bank, Credit Suisse Group and BNP Paribas as acting as joint advisers for the transaction.

In the current climate, is it wise for an airline such as AirAsia to be selling off its leasing unit just as deliveries are ramping-up? Will AirAsia retain the ability to lease aircraft at a profit in the event that it cannot fill them? It deserves additional thought that is for sure.

Meanwhile, the decision yesterday of the European Union (EU) to arbitrarily charge Apple €13bn is monumental and brings Ireland’s use of low taxation as an incentive to base offices in the country firmly under the spotlight (€13bn is incidentally around the same amount as the gross annual Irish health budget).

The truth is that Luxemburg is lobbying within the EU to have attention deflected away from its own regime and its government has gone to great lengths to bring Ireland under the spotlight over the past few years. Luxemburg argues that it is unfair to force change on its tax regime while ignoring Ireland’s record.

In all this one wonders how long it would be before aircraft leasing is mentioned. By 10pm BST yesterday, when Apple’s share price was falling heavily, six separate major news channels had all mentioned aircraft leasing and the benefits that sector collectively receives from having an office in Ireland. So, will this story dissipate over the coming week or will the EU officials continue sharpening their knives now that they have had a success?

Over in the UK, the trade and industry department officials were likely celebrating the fact that the EU is hell bent on giving a post Brexit UK a distinct advantage, especially given that the decision on Apple yesterday must surely put a further delay on US-EU trade talks.

And today we have the news that Novus is opening an office in London to join BOC Aviation, LCI and others.

Now is the time for the Irish government to show its metal and face down the EU to protect its interests. Although many Irish citizens might well agree that the deal with Apple all those years ago was a bit shabby, they will most likely also agree very strongly that it is up to Ireland to agree its own tax levels and up to Ireland to collect taxes as it sees fit. This EU decision has the potential to create resentment in Ireland, one of the most pro-EU countries in the block.

Meanwhile, how can airlines boost the price of its share out in one quick step? Easy – Just hire Scott Kirby! Scott Kirby’s move to United Airlines this week added $1.5 billion to the value of the airline as investors sent shares up 9.58% in trading Tuesday.

Juliette O'Neill
By Juliette O'Neill September 1, 2016 09:12