Thai Airasia License May Be Revoked

[sriracha john]

Thai AirAsia licence in doubt

Bangkok Post

The Transport Ministry is investigating Thai AirAsia's shareholding structure to see if it should still be licensed as a Thai airline following the sale of its parent company Shin Corp to Singapore's Temasek Holdings.

A ministry source said a Thai airline must be at least 51% Thai-owned. Shin Corp used to have a 51% stake in Thai AirAsia while the rest is held by AirAsia of Malaysia.

Following the sale on Jan 23 of the Shinawatra and Damapong families' 49.6% holding in Shin Corp, the remaining Thai owner of Thai AirAsia should be its chief executive officer Tassapon Bijleveld, who has a 1% stake.

The airline management is looking for a new Thai partner to retain the 51% proportion and the business, the same source said.

Deputy Transport Minister Phumtham Wechayachai said yesterday that he had ordered the Aviation Department to check the shareholding structure of Thai AirAsia. Pending its reply, the airline could continue its service as usual.

Chaisak Angsuwan, head of the Aviation Department, said he had already inquired about the shareholding structure with the airline, the Securities and Exchange Commission and the Commerce Ministry, and was waiting for their replies.

If the Thai ownership was less than 51%, the department would revoke Thai AirAsia's licence, he said.

Mr Tassapon was unavailable for comment yesterday but would hold a press conference on the matter soon, his secretary said.

[chanchao]

"Oh, you guys didnt know you can't actually run that airline because you're not Thai? Well sorry, you should have checked that before handing over the money."

Maybe Mr. Temasek can just marry a Thai lass and put the lot in her name.

[bluebear]

Dont worry, I am sure they got a money back guarantee from Toxy!

[joe beets]

They'll just write a new law.

Effective yesterday.

Or register Temasek as Thai.

Or let it become a Singaporean airline.

(It's really Malaysian anyway, n'est-ce pas?)

Or...

Or...

Nothing to see here - move along, folks.

jb

[Ricardo]

This must be really upsetting for both the Singaporeans, owning this mess, or Malaysians, where Air Asia is based. Surely it must have been forseen - and a solution in-place - before the deal went through.

Or did someone forget to change the Thai laws on foreign-ownership-of-airlines in time ? Never mind - just back-date it !

So will Temasek sell TAA on the SET (at what price ? - do TAA make money ?) , in which case how to ensure that no foreign-investors buy any shares in it (which would again take foreign-ownership above 49%), or do they have a cash-rich Thai partner lined-up already ? Suspect the former would be more popular - with the Thai people ?

[sriracha john]

NEW TIE-UP FOR AIRASIA

Published on February 08, 2006

The Nation

Rush for partner after Shin sale to keep Thai licence;‘deal this week’. Thai AirAsia has become the first unit of Shin Corp to feel the fallout from the Temasek deal, as the budget carrier scrambles to comply with Thai laws on foreign ownership. CEO Tasapon Bijleveld said yesterday the airline was looking for new Thai partners to maintain its Thai-majority ownership in order to keep its aviation licence.

Thai AirAsia is a 50:49 per cent joint venture between Shin and Malaysia’s Air Asia.

“We hope we can announce the new partners on Friday or Saturday,” Tasapon said. There were two potential candidates but he de-clined to name them. (Thaksin's kids?) “We’ll do everything to comply with Thai laws on foreign business ownership. We don’t want to be in a grey area,” Tasa-pon said.

A source said the Aviation Department had sent a letter to the airline asking it to review its shareholding structure after Temasek Holdings became the largest shareholder in Shin Corp, which owns a 50-per-cent stake in Thai AirAsia.

Temasek’s 49.6-per-cent stake in Shin Corp pushed Thai AirAsia’s foreign ownership above the 49 per cent limit, putting it in breach of the Foreign Business Act.

This disqualifies the airline from holding a licence for aviation services in the Kingdom.

To remain eligible for the licence, the airline, which was launched in 2003, must ensure that Thai nationals or Thai entities own at least 51 per cent of its shares.

Currently, Shin Corp owns 50 per cent of Thai AirAsia, Air Asia founder Tony Fernandes owns 49 per cent and Tasapon, a Thai national, owns the remaining 1 per cent.

When signing the share-purchase contract with Shin Corp, Temasek said it had no plans to sell any Shin-owned businesses.

Temasek’s takeover of Shin has sparked a public backlash over fears national assets will fall into foreign hands. Temasek is under strong public pressure to sell Shin Corp’s stakes in Shin Satellite, iTV and Advanced Info Service (AIS) to avoid a conflict with those who want to keep ownership of Thai airwaves, radio frequencies and satellite orbital rights in Thai hands.

Market watchers have said Tem-asek might sell some Shin units to recoup part of its massive investment and that Prime Minister Thaksin Shinawatra’s family could end up buying them.

Temasek has already spent Bt73.3 billion for a 49.6 per cent stake in Shin and plans to spend Bt79 billion more for the remaining shares. It also plans to spend Bt122 billion to snap up more AIS shares.

Democrat MP Kiat Sitthee-amorn said Thaksin appeared to have compromised national and security interests by allowing his family to sell its stake in Shin Corp to the investment arm of the Singaporean government.

Kiat said it was necessary to investigate whether the deal violated the law, given that it resulted in cascading shareholding in several Shin units that might push their foreign ownership ratios above the legal limit.

[sriracha john]

Additional info from Bangkok Post:

The Department of Civil Aviation issued an ultimatum to Thai AirAsia to clarify the shareholding issue and make the necessary correction within the next two weeks or have its operating licence cancelled.

The department has also asked the Securities and Exchange Commission and Commerce Ministry to verify the shareholding status of Shin Corp and AirAsia.

In the meantime, Thai AirAsia is allowed to continue flying Thai domestic routes and serving neighbouring countries.

[Jai Dee]

PONGSAK warns entrepreneurs who run aviation business in Thailand have to respect Thai laws

Transport Minister PONGSAK RAKTAPONGPAISAL (พงษ์ศักดิ์ รักตพงศ์ไพศาล) affirmed that aviation business operators in Thailand must abide by Thai laws. He also said that Air Asia Plc. has to readjust the portion of its shareholders, or otherwise, the company's license will be confiscated.

He disclosed that he has clearly informed the regulations of his ministry to the Department of Civil Aviation on considering shareholding of Air Asia Plc. where Temasek Holdings of Singapore has now hold the stakes of the business instead of Shin Corporation Public Company Limited.

He also referred to people’s security on using services of the aviation companies that his ministry will limit plane’s life period which the Department of Civil Aviation is making the subject including checking effectiveness of plane’s equipments.

Source: Thai National News Bureau Public Relations Department - 08 Febuary 2006

[cclub75]

Super easy : a maid, a chauffeur, or a gardener (mine is a nice bloke) will be a perfect nominee to hold XX% of the shares of the company.

What all this mess is about ?

Anyway, we can be proud of the reactivity of the administration : raise the problem 2 weeks after the sale, and then grant another 2 weeks to AirAsia to... well find the maid or the driver.

That's cool.

[thedude]

i've explained this in other threads but i'll repeat this here.

Singapore has had a long held rivalry with Air Asia of Malaysia. In trying to protect its own budget airlines (Tiger, Valuair/Jetstar Asia), it has continually denied Air Asia landing rights in Singapore. Air Asia turned around and signed a joint venture with Shin Corp so that they could have access to the Thai market instead.

While the Temasek buyout of Shin Corp is mainly a telco deal, it also disguises a secondary play on Air Asia. Now Temasek owns 51% of Thai Air Asia, they will force Air Asia to dilute its shareholding here or else face losing its license. Temasek probably wants Air Asia to end up losing its license, so it can replace it with Tiger Airways or some other singapore budget airline, or at the very least, create a more level playing field for its home grown carriers. Its all about market share, because the budget airline business requires scale to be profitable in the long term.

The most interesting thing about the Shin corp buyout to me is not Thaksin's bundle of tax free cash, but how it reveals Temasek's brilliant but ruthless strategic approach. The budget airline industry is being reshaped before our eyes. The government is probably doing Temasek a favour by denying Thai Air Asia its license right now.

Now that you know this, try reading the press releases again and you will see it in a completely different light.

Edited February 8, 2006 by thedude

[womble]

i've explained this in other threads but i'll repeat this here.

Singapore has had a long held rivalry with Air Asia of Malaysia. In trying to protect its own budget airlines (Tiger, Valuair/Jetstar Asia), it has continually denied Air Asia landing rights in Singapore. Air Asia turned around and signed a joint venture with Shin Corp so that they could have access to the Thai market instead.

While the Temasek buyout of Shin Corp is mainly a telco deal, it also disguises a secondary play on Air Asia. Now Temasek owns 51% of Thai Air Asia, they will force Air Asia to dilute its shareholding here or else face losing its license. Temasek probably wants Air Asia to end up losing its license, so it can replace it with Tiger Airways or some other singapore budget airline, or at the very least, create a more level playing field for its home grown carriers.

The most interesting thing about the Shin corp buyout to me is not Thaksin's bundle of tax free cash, but how it reveals Temasek's brilliant but ruthless strategic approach. The budget airline industry is being reshaped before our eyes. The government is probably doing Temasek a favour by denying Thai Air Asia its license right now.

Very clever indeed!!!

Sneaky!

But Clever!

[britainmal]

The Singapore Budget airlines can't operate domestic flights in Thailand because they are considered a foreign airline, but prior to that deal Air Asia was able to because it was considered as a Thai airline. Air Asia could lose that right to operate domestic flights if it becomes a foreign airline. How about Singapore's other competitors like Nok Air and Thai Airways.

[thedude]

The Singapore Budget airlines can't operate domestic flights in Thailand because they are considered a foreign airline, but prior to that deal Air Asia was able to because it was considered as a Thai airline. Air Asia could lose that right to operate domestic flights if it becomes a foreign airline. How about Singapore's other competitors like Nok Air and Thai Airways.

okay let me try to guess how the scenario will play out.

1. thai airasia is now operating illegally as a foreign entity

2. it is 49% owned by air asia, and 51% owned by temasek

3. the only way it can operate legally again, is if the foreign component, ie air asia + temasek = 49% or less, with a 51% local partner.

4. in order to achieve this, both parties have to agree to either i) issue new shares to the new partner and dilute their respective shareholding down, or ii) to sell off all or part of their existing shares.

5. under option i) since temasek is now the majority shareholder, it has to agree to whoever the new thai partner is, and not the other way around.

6. thai airasia cost temasek very little money, because it was bundled under the shin corp deal.

7. temasek can afford to wait forever and not approve any proposed thai partner.

8. air asia on the other hand, will lose its license to operate in 2 weeks time and its foothold in thailand.

9. in the worst case scenario, as the main shareholder, temasek will then opt to not recapitalise the operation and let the company freeze.

10. more likely, temasek will find a friendly thai partner of its own choosing, offer to buy out airasia for cheap, and then sell the entire foreign portion down to tiger airways, or jetstar asia, while getting the operting license reinstated.

11. in either case, the only way forward for air asia is to exit and find its own thai partner, and re-apply for another license. whether that license will be granted remains to be seen.

12. in choosing to exit, it will be better for air asia to seek option ii) mentioned above, ie selling its own stake to a third party.

Edited February 8, 2006 by thedude

[dan10400]

considering the current legal issues for TAA, it is surely a buyers market.

it is hard to believe that the singaporean investment group were unware of

the legal ownership requirements regarding airlines operating domestic

routes.

that being said, this whole thing must be ancillary to what the true deal

was. i find it hard to believe that the net benefits to Tiger Airways will

exceed the costs of shuttering TAA (on a standalone basis).

--dan

[thedude]

considering the current legal issues for TAA, it is surely a buyers market.

it is hard to believe that the singaporean investment group were unware of

the legal ownership requirements regarding airlines operating domestic

routes.

that being said, this whole thing must be ancillary to what the true deal

was. i find it hard to believe that the net benefits to Tiger Airways will

exceed the costs of shuttering TAA (on a standalone basis).

--dan

right you are, dan.

i think quite on the contrary they went in with their eyes wide open and their knives sharpened for the kill.

i agree that its ancilliary to the main deal, but it cost them nothing, and if it allowed them to reshuffle the deck and give tiger airways a leg up, why not!?

this is still the early stages of the budget airline industry, and its worth pointing out that as the largest tourist destination in the region, thailand is a heck of a big chess piece in the overall game. losing thailand will definitely hurt air asia more than even losing their own home turf of malaysia simply because of the scale and volume of traffic.

[Ricardo]

So Thai Air Asia was already 49% foreign-owned, and 50% by Shin Corp. And a big chunk of Shin Corp was owned by offshore (ie not Thai) BVI company Ample Rich. Plus some other shares in Shin Corp must surely have been owned by farangs - via the SET.

So surely TAA was already, even prior to the Shin Corp sale, in breach of the 51%-Thai-owned rule ? And should already have lost its operating-license ?

Just an observation

[Jai Dee]

Civil Aviation Department orders report on Thai Air Asia's shareholding structure

In the wake of the Shin and Temasek deal, the Civil Aviation Commission has called for a report on budget airline Thai Air Asia's share-holding structure, and in another development, approved Thai Airways' increase of fares for the African and Middle East routes.

Transport Minister Pongsak Raktapongpaisal (พงษ์ศักดิ์ รักตพงษ์ไพศาล) said the Securities and Exchange Commission will inspect the shareholding structure in Thai Air Asia and report back to the Ministry of Transport.

Civil Aviation Department Director-General Chaiyasak Angksuwan (ชัยศักดิ์ อังค์สุวรรณ) said Thai Air Asia must find a minimum 51 percent of Thai shareholding within 15 days. Otherwise the company will lose its aviation license.

The Civil Aviation Commission yesterday also gave permission for Thai Airways to raise by 5 percent its air fare for the African routes and between 2 to 7 percent on the Middle-east routes. Thai Airways has also been asked by the Ministry of Transport to increase its market share for the cargo business to 50%. The company will have to make proposals in this regard within one month.

Source: Thai National News Bureau Public Relations Department - 09 Febuary 2006

[ilyushin]

Agreed. Singapore will limit AirAsia in the market to support the other carriers.

They also could benefit by transfer of the Thai AOC to another company to operate the domestic flights. That would allow code shares for the other carriers to attain domestic flight status.

Very easy to arrange the AOC or AOP to continue the domestic services within the Kingdom.

It is all about money.

[Plus]

I wonder if it's another loophole - sell the company first, review foreign ownership later. They didn't do it with Shin itself and changed the law prior to sale announcement, but what about Air Asia? Why it was allowed to be sold, as part of Shin, when it was in clear breach of foreign ownership rules?

Rhetoric questions - Taksin has preferential treatment.

Oh, I forgot, he has nothing to do with this. Shin belongs to his kids, it's them who did it.

[sriracha john]

Thai AirAsia ups Thai stake

Done to comply with foreign holding limit

Thai AirAsia has changed its shareholding structure, leaving the airline with Thai investors holding a majority stake. The budget airline decided on the shareholding alteration in order to comply with Thai laws on foreign ownership after the takeover of Shin Corp, which owned 50% of the airline, by Singapore's Temasek.

The sale of Shin Corp on Feb 23 caused the no-frills carrier to fall foul of rules which state that Thai-registered airlines must be at least 51% Thai-owned.

Thai AirAsia chief executive Tassapon Bijleveld yesterday said the airline had changed its shareholding structure by bringing in Asia Aviation Co to replace Shin Corp.

The new firm has already been registered with the Commerce Ministry's Business Development Department. A press conference on the new shareholding structure will be held today.

A source said Asia Aviation was registered yesterday with capital of five million baht. The four executives on its board are Arak Chonlatanon, Siripen Sittsuwan, Sitthichai Veerathammanoon and Bussapa Saeng-ngarmplang.

Its office is located on Phahol Yothin road in Phaya Thai district.

A document on its shareholding proportions showed that the firm had a total of 500,000 shares. The company has seven founders: Shin Corp chief executive officer Boonklee Plangsiri, Siripen Sittasuwan, Mr Arak, Mr Tassapon, Khunakorn Setthee, Pornanand Kerdprasert and Jitchai Musikabut.

Asia Aviation has Shin Corp holding 49% of the shares with the rest held by Thai investor Mr Sitthichai.

The source said Asia Aviation was given until next Monday to divulge its shareholding details.

Transport Minister Pongsak Raktapongpaisal said he had yet to receive a report on the change of stakeholders.

But Chaisak Angsuwan, director-general of the Aviation Department, said he was verbally informed by Mr Tassapon that Thai AirAsia had changed its shareholding structure.

Under the old structure, Shin Corp held a 50% stake, Mr Tassapon 1% and Malaysia's AirAsia 49%. The adjustment would enable Asia Aviation to hold 50% of the total shares, Mr Tassapon has 1% and Kuala Lumpur-based AirAsia holds 49%.Deputy Transport Minister Phumtham Wechayachai said the ministry was awaiting an Aviation Department report. The airline still has 15 days to finalise its shareholding structure.

[Sumppen]

To remain eligible for the licence, the airline, which was launched in 2003, must ensure that Thai nationals or Thai entities own at least 51 per cent of its shares.

Currently, Shin Corp owns 50 per cent of Thai AirAsia, Air Asia founder Tony Fernandes owns 49 per cent and Tasapon, a Thai national, owns the remaining 1 per cent.

Call me stupid, but isn't Shin Corp still a Thai entity, even though IT is mainly owned by foreigners?

[britmaveric]

Hmmm guess I can book Air Asia tickets now!!

[cclub75]

Asia Aviation has Shin Corp holding 49% of the shares with the rest held by Thai investor Mr Sitthichai.

The CEO of AirAsia said : "Mr Sitthichai is wealthy... he was working for DHL" !!!!

He added that he knew him because he was a buddy of university.

Anyway, case closed.

To respect the law, thai shareholders needed to have 51 %. Done with "Mr Sitthichai".

In western countries, we call that a "white knight"... The third man, the providential man.

I'm wondering how much he got paid to sign the paper ?

Thailand = the Hub of Nominees (i remember you the best one : the maid and the driver of Mister Thaksin in 2001, at that time the Constitutionnal court, by a short vote, said "sabai sabai no problem").

[otherstuff1957]

I was wondering how many people in Thailand could just come up with the cash to buy 50% of an airline on the spur of the moment. Well, it didn't take them long to find someone.