Bursa Filings


Renewal Of Fee Schedule To The Services Agreement With AirAsia X Sdn Bhd

Back Nov 28, 2008
Type Announcement
Subject AIRASIA BERHAD ("AIRASIA" OR "COMPANY")
RENEWAL OF FEE SCHEDULE TO THE SERVICES AGREEMENT WITH AIRASIA X SDN BHD
Contents PLEASE REFER TO THE ANNOUNCEMENT DETAILS BELOW.
  1. 1.                  Introduction

 

AirAsia Berhad (“AirAsia” or “the Company”) is pleased to announce that it has today entered into a Renewal of Fee Schedule (“Renewal”) to the Services Agreement which the Company had executed with AirAsia X Sdn Bhd (“AAX”) on 31st October 2007 (“Services Agreement”).  The purpose of the Renewal is to revise the fee structure for the services provided under the Services Agreement. 

 

 

  1. 2.                  Details of  AAX

 

AAX was incorporated on 19th May 2006 and had its name changed to AirAsia X Sdn Bhd on 21st September 2007.

 

 

On 13th September 2007, AirAsia completed a share subscription exercise whereby the Company subscribed to 26,666,667 Redeemable Convertible Preference Shares (Series 1) of RM1.00 each for a cash consideration of RM26,666,667.

 

 

The current major shareholder of AAX is Aero Ventures Sdn Bhd (formerly known as Mangkin Masyhur Sdn Bhd), a company in which both Dato’ Anthony Francis Fernandes and Dato’ Kamarudin Bin Meranun are substantial shareholders. 

 

 

3.         Salient terms of the Renewal  

 

As previously announced on 31st October 2007, the Company under the terms of the Services Agreement has agreed to provide AAX a range of services (“Services”) identified within the Services Agreement  in exchange for a payment of Fees.  The parties have agreed to include the following to the current range of Services:
  1.  GoInsure
  2.  Investigations

 

The parties have also agreed to revise the relevant Fees based on the scope of AAX’s planned operations.   The fee payable by AAX to the Company under this Agreement over a 12 month period is estimated to be approximately RM43 million which is inclusive of a 10% mark-up.  The said figure is derived based on current and future utilization of services at rates negotiated on arms length basis.

 

The revised Fees are deemed to effect from 1st day of November 2008.

 

 

4.         Rationale for entering into the Agreement

 

The Company is of the view that the rationale for entering into the Services Agreement still holds true and as such has decided to extend the Services under the Renewal.  The rationale given previously is as follows:  

 

(a)               To ensure that the AirAsia brand granted to AAX under the Brand License Agreement of 20th July 2007 is protected by ensuring the quality and service level is of the same high standards set and practised by the Company; and

 

(b)               AirAsia has the capacity to offer its services such as training at AA Academy, Flight Operations, etc. to AAX’s Budget Long Haul Service. This will be an additional source of recurring income to AirAsia.

 

 

5.         Financial Risks

 

The downside financial risks associated with the provision of the Services are expected to be very limited because the Company will not be investing in any specialised or expensive equipment. However, where required, there will be a marginal increase in the manpower required to undertake the Services. In the event that the Renewal is terminated for whatever reason and at any point in time, these additional resources can be readily absorbed by the Company’s ever expanding short haul operations.

 

The Company will also not be providing any financial guarantees or be made liable for the non-performance of AAX’s Budget Long Haul Service falling outside the scope of the Renewal. All day to day general control and financial management, operational and strategic planning and corporate decisions will continue to rest with AAX’s own appointed management and Board of Directors, which is completely independent of AirAsia.

 

 

 

6.         Directors’ and major shareholders’ interests

 

Dato’ Sri Anthony Francis Fernandes and Dato’ Kamarudin bin Meranun are directors and major shareholders of the Company. Hence, they are deemed interested in the Renewal. They have previously abstained and will continue to abstain from all Board and management deliberations in respect of the Renewal and provision of the services.

 

The interested directors’ and interested major shareholders’ direct and indirect shareholdings in AirAsia as at 28th November, 2008 are as set out in the table below.

 

 

 

Direct 

Indirect 

 

 

No. of Shares 

% 

No. of Shares 

% 

Dato’ Sri Anthony Francis Fernandes

2,627,010

0.11

*729,458,382      

30.72

Dato’ Kamarudin bin Meranun

1,692,900

0.07

*729,458,382         

30.72

 

Note:

 

* deemed interested by virtue of Section 6A of the Companies Act, 1965 through a shareholding of more than 15% in Tune Air Sdn Bhd

 

Save as disclosed no other directors and/or major shareholders of AirAsia and/or persons connected with them have any interest, whether directly or indirectly, in the Renewal.

 

 

7.        Directors’ opinion

 

Save for the above interested directors (who have abstained), the Board having considered all the relevant factors in respect of the Renewal is of the opinion that entering into the Renewal is in the best interest of the Company.

 

 

8.        Financial effect of the Agreement

 

This Renewal will not create any material financial impact nor will it have any effect on the share capital and substantial shareholders’ shareholdings of AirAsia in the current financial year. It is also not expected to have a material effect on the consolidated net assets of AirAsia and the consolidated earnings of AirAsia for this financial year ending 31 December 2008.

 

 

  1. 9.              Approval required

 

AirAsia does not require the approval of its shareholders or any authorities to enter into the Renewal.

 

 

  1. 10.          Document available for inspection

 

The Renewal is available for inspection at the registered office of the Company at 25-5, Block H, Jalan PJU 1/37, Dataran Prima, 47301 Petaling Jaya, Selangor Darul Ehsan, Malaysia during normal business days from Mondays to Fridays (except public holidays) for a period of 3 months from the date of this announcement.

 


This announcement is dated 28th November, 2008.



Announcement Info

Company Name AIRASIA BERHAD  
Stock Name AIRASIA    
Date Announced 28 Nov 2008  
Category General Announcement
Reference No CM-081128-62509