AirAsia Moves Corporate HQ from KL to Jakarta

By Asia Sentinel
23 July 2011

With all the troubles he has had over the last two months, the confirmation Friday that AirAsia, arguably Malaysia’s most vibrant private company, is moving its headquarters out of the country to Indonesia is one more blow.

Tony Fernandes, AirAsia’s group chief executive, confirmed the decision in Tokyo Thursday, saying the move is an effort to upgrade his company’s image as a regional Southeast Asian airline rather than just a Malaysian carrier.

“I don’t know whether Najib has been told or not,” said a business associate of Fernandes in Kuala Lumpur. “But why should Tony care? There are solid business reasons for moving to Jakarta.”

Najib has been on a whirlwind trip to foreign capitals to try and mend the country’s image in the wake of a violent police crackdown on peaceful marchers seeking to present a petition to the country’s king on July 9, asking for election reform. In a throwback to the 1980s, Malaysian censors blacked out details of a report about the march carried in The Economist.

That was followed on July 23 with the results of a royal commission of inquiry that concluded that a young aide to an opposition politician had been hounded so badly during a marathon interrogation over office spending that he threw himself out of a window and killed himself.

Then on Friday, immigration officials took William Bourdon, the leader of a team seeking to ferret out the details of a massive scandal involving defense procurement, off a plane in Kuala Lumpur, held him for several hours and ordered him deported via a flight back to Paris.

Fernandes characterized the move of the headquarters as a simple business decision to take advantage of Indonesia’s vastly larger economy and population, which is nearly 10 times that of Malaysia’s, although Malaysian annual per-capita gross domestic product of US$14,700 by purchasing power parity is much higher currently than Indonesia’s at US$4,200. The size of the country, however, meant that the Indonesian economy was estimated by the CIA Factbook for 2010 at US$1.03 trillion against Malaysia’s US$414.4 billion.

AirAsia’s decision to move the headquarters is a serious negative propaganda blow for Najib’s 1Malaysia Plan, an intensive effort to lure foreign direct investment to Malaysia. In September 2010, the Malaysian government announced ambitious plans to mobilize hundreds of billions of dollars in private investment in an effort to move the country out of the so-called middle income trap, and double per capita income to push Malaysia into the ranks of developed nations by 2020.

AirAsia may well be the only Malaysian company besides the state-owned energy giant Petronas to have made an international impact – and Petronas does it by advertising intensively during Formula 1 races and by sponsoring a car – which Fernandes does as well. Launched in 2002 as a regional no-frills carrier with just two planes, AirAsia now flies 93 planes all over Asia. In addition, a long-haul service, AirAsia X, flies to Europe, Japan and Korea. The company earlier ordered 300 Airbus expand its routes across Asia and beyond.

It isn’t just the publicity damage. In the past 10 years, according to a report by the news agency Reuters, private companies invested just RM535 billion (US$172.4 billion), according to official data. Malaysia’s private investment rate of about 10 percent of GDP is among the lowest in Asia and a third of what it was before the 1998 Asian financial crisis. The government, according to Reuters, contributes around half the investment in Malaysia.

In addition, Malaysia has long been plagued by capital flight, which has been generally regarded as an indication of lack of faith in the country on the part of its businessmen, although in Malaysia’s case the bulk may well be from stolen timber leaving the country from Sarawak and Sabah. Nonetheless, the US-based financial watchdog Global Financial Integrity estimated in a 2010 report that as much as RM888 billion (US$298.3 billion at current exchange rates) had left the country between 2000 and 2008. Illicit financial flows generally involve the transfer of money earned through illegal activities such as corruption, transactions involving contraband goods, criminal activities and efforts to shelter wealth from tax authorities.

AirAsia said the move is a bid to take advantage of access to the Asean secretariat, which is based in Jakarta, in advance of an open skies agreement expected to go into effect in 2015 and which is designed to lower barriers for air travel between the region’s capitals.

Asked why he chose to move the fast-growing airline’s principal corporate base to Jakarta from Kuala Lumpur, Fernandes said: “Asean is based in Jakarta, and Indonesia will be the largest economy in Asean in times to come … And I like it there” – enough, he said, to have impelled him to have already bought a home in Jakarta.

The Indonesia National Air Carriers Association forecasts passenger growth at 10 percent to 15 percent this year. Indonesia’s Central Statistics Agency reported that domestic air traffic grew 22 percent to 53.4 million passengers in 2010 on growing demand from the middle class for domestic flights. That is higher than the 9 percent average increase recorded by Asia-Pacific carriers, according to data from the International Air Transport Association.

“Indonesia is among very few countries that managed to record strong growth in air traffic last year,” said an analyst quoted by the Jakarta Globe. “The lack of available airlines compared to population and geographic conditions is only a sign that there’s a lot of opportunity here.”

  1. #1 by monsterball on Monday, 25 July 2011 - 6:03 pm

    Tony Fernandes denies the move.
    He said Asia is expanding and the HQ will always be in Malaysia.
    He said he is expanding the Indonesian offices…not moving HQ to Indonesia at all.
    All reported in Malaysiakini.

  2. #2 by ENDANGERED HORNBILL on Monday, 25 July 2011 - 6:16 pm

    Indonesia is a beautiful country.

    Indonesia does not have UMNO, Perkasa, BTN, Ibrahim Ali, Najib or Muhyiddin or Nazri.

    Indonesia has beautiful air stewardesses.

    Probably, Virgin Airways and Sir Branson will set up HQ there too. He will find Indonesian stewardesses lighter to carry.

    Indonesia has many pilots to offer too; cheaper and skilled too. They won’t watch X-rated movies on flight like MACC.

  3. #3 by monsterball on Monday, 25 July 2011 - 6:21 pm

    If Virgin Airways goes leave Britain and goes to Indonesia…Air Asia may follow.
    The two CEOs are like blood brothers..trying to kill each other…smiling.

  4. #4 by pulau_sibu on Monday, 25 July 2011 - 7:15 pm

    Never mind. Najib can start a new company Air 1malaysia to compete with Air Asia.

  5. #5 by waterfrontcoolie on Monday, 25 July 2011 - 11:01 pm

    Well, Tony may not be the only REAL owners of Air Asia.His partners may be making ready tgeir moves, after smelling a sinking ship! Ha! ha! ha1, soon the floodgate will open! There can’t be any other reason. Tony must be forewarned! anyway, spending anotherb$30 billions on other planes is another quick option!

  6. #6 by k1980 on Tuesday, 26 July 2011 - 1:41 am

    Najib can start a new company Air Jibby to compete with Air Asia. And as a GLC, it will get RM500 billion in govt grants. Then declare itself bankrupt in 12 months and someone out there is richer by RM500 billion. Losses covered more subsidies cuts and by the 28 million rakyat paying the GST through their noses.

  7. #7 by Joshua on Tuesday, 26 July 2011 - 5:04 am

    Is MAS also in trouble as the chairman resigns or retires?

  8. #8 by best4rakyat on Tuesday, 26 July 2011 - 10:51 am

    Why can’t if is professionally and business sound too?
    One day many chinese malaysian may feel more comfortable to deal with great China in near future.
    May be by that time there will be another restrictive EO particularly for modern sense of dealing with communist country like China?
    In ’60-’70 word communist was too scarely to be mentioned but now shake hand with a laughable smile means nothing to Malaysia except some old past still haunted with Chin Ping once a fooly comrade socalled close to communist China??
    A typical character since Malacca sultanate dealing with China dynasty!!!

  9. #9 by Godfather on Tuesday, 26 July 2011 - 11:07 am

    Tony Fernandez has now said that the HQ of AirAsia will remain in KL. However, there is some truth to the story that AirAsia will have a regional headquarters in Indonesia. The Jakarta office will be bigger than the KL headquarters which will probably only have some token staff. This is to avoid offending the Bolehland government.

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