AirAsia looks to sell stake in loyalty program, say sources – Reuters

Malaysia’s AirAsia Bhd (AIRA.KL) is in talks to sell a minority stake in its loyalty program joint venture to private equity firms, in a deal that could value the business at about $330 million, people familiar with the matter told Reuters.

AirAsia BIG, the loyalty program owned by Asia’s biggest budget airline and Malaysia’s Tune Group, could raise about $100 million by selling about a 30 percent stake, the people said.

The sale highlights AirAsia’s attempts to monetize its affiliates and comes after the airline – co-founded by entrepreneur Tony Fernandes – reported its first net loss in two years in the October-December quarter.

Asian airlines are waking up to the value of frequent-flyer and loyalty programs. Last year, Virgin Australia (VAH.AX) sold a minority stake in its frequent-flyer program to private equity firm Affinity Equity Partners at a valuation which implied it was worth more than a third of the airline’s total enterprise value.

AirAsia did not respond to requests for comment. The sources declined to be identified as the discussions are confidential.

The deal was expected to close in a few months, although the talks were currently at an early stage and the value and stake were subject to change, the people said.

Airlines sell miles in bulk to commercial partners, which use the credits to attract customers and mine valuable data on their spending habits. Members then use the miles to buy anything from seat upgrades to vouchers for retail stores.

AirAsia’s BIG loyalty program has more than 12 million members and is spread across Southeast Asia. It includes over 100 partners ranging from credit card companies, retail stores, hotels and travel industry brands.

Fernandes has built AirAsia from two planes in 2001 to an airline that operates about 170 aircraft with affiliates across Southeast Asia and India. AirAsia has been firming up deals with partners to boost its loyalty program.

To preserve cash, it is taking deliveries of fewer new aircraft compared with previous years and is selling older aircraft.

Tune Group is owned by AirAsia’s co-founders Fernandes and Kamarudin Meranun.

Underscoring the potential in Southeast Asia, home to a rapidly-growing middle-class market and a 600 million-plus population, AirAsia brought in Toronto-listed Aimia Inc (AIM.TO) last year as a minority investor in Think Big Digital Sdn Bhd, which operates AirAsia and Tune Group’s loyalty program.