ZestAir -> AirAsia

The alliance between Zest Air and AirAsia Philippines is about to go beyond a strategic partnership emerging as a single branded airline within the next two months if plans materialize.

Marianne Hontiveros, AirAsia Philippines CEO, said that the plans are to develop a rebranded airline that would carry the names of ZestAir and AirAsia. While the two airlines would share a common name, they will continue to be operated separately.

“Zest has got a brand name bigger than AirAsia in the Philippines. But the AirAsia brand is very valuable,” said Hontiveros. “We are already standardizing our operations and our look. Even the uniforms. You will see there will be a change in Zest, moving toward the red colour.” She added that they were considering to relaunch the new brand in September or October. “I was hoping by September or October. We want ZestAir to carry the AirAsia brand and color as well,” added Hontiveros.

Both airlines are just awaiting the approval of the Civil Aeronautics Board, the Civil Aviation Authority of the Philippines, and the Securities and Exchange Commission prior to proceeding with the rebranding. “We’d like to project ourselves as belonging to one family with the same standards of service,” said Hontiveros.

Under the rebranded airline, certain operations of both AirAsia and ZestAir would be merged including commercial marketing and background operations along with human resource development. Both airlines would continue to maintain separate Airline Operators’ Certificates meaning that logistically and technically, AirAsia will continue to operate separate from ZestAir but the passenger experience would reflect travelling on a single carrier.

“AirAsia will be operated as AirAsia while ZestAir will be operated as ZestAir,” said Hontiveros. “The operations are still separate as ZestAir will continue to operate in its Manila, Kalibo, and Cebu hubs while AirAsia will continue to operate out of Clark.” In terms of names for the rebranded airlines, Hontiveros indicated that it is a choice between “Zest Air Asia” or “Air Asia Zest” adding that the airline has already undertaken several studies to select a new name. Regulatory approval is anticipated by October and aviation critics believe that the rebranding will prove to beneficial.

According to analysis by the Centre for Aviation, the outlook for AirAsia Philippines will improve considerably if the two carriers will be able to fully integrate their operations. The move to consolidate the brands would prove to be beneficial especially in the event of a merger.

“A single brand and product across the Philippine market, including both Manila and Clark, should improve AirAsia’s position in the Philippines,” stated the Centre for Aviation in its analysis of AirAsia’s operations. The positive outlook was indicated in spite of increasing competition from dominant players including Cebu Pacific and PAL Express.

AirAsia Philippines has also declared that it plans to increase its stake in ZestAir. Hontiveros indicated to reporters that the airline was “open” to raising its 49% stake in ZestAir but that it would require congressional approval as the move would require changes in ZestAir’s franchise.

“It’s AirAsia Philippines that bought in. That’s why there is no restriction on ownership as a Filipino company; but ZestAir has a congressional franchise and under that franchise agreement, any material change in the ownership structure will need congressional approval,” Hontiveros said. She added that the move depends on how much Zest Air President & CEO Alfredo Yao is willing to relinquish of his 51% stake.

Hontiveros admitted that officials from both carriers have previously discussed a possible share increase but would not elaborate on details. “We’ve discussed it, but I don’t want to pre-empt what Ambassador Yao wants to do,” she added.
Ambassador Yao confirmed that a meeting had taken place and that a possible share increase is part of the expansion but no agreement has been finalized. He added that the matter may be discussed at a board meeting later this week.

AirAsia Group submitted a report indicating that it expects AirAsia Philippines to achieve profitability in 2014 as the carrier’s network expands. Tony Fernandes, head of the AirAsia Group, criticized the actions of CAAP after it suspended the operations of ZestAir. In an e-mail to Zest Air staff, Fernandes stated how “shocked” and “horrified” he was at the news that CAAP had suspended the airline.

“I am shocked and horrified by the behaviour of the regulator. No where in my 12 years of aviation have I seen such behaviour,” said Fernandes. “People are getting worried about us and know we are going to change Filipino aviation forever.” He added that, “Many competitors are terrified of us. I am so damned determined now to be number 1. My fire has woken up. And I’m ready for the fight.”