SEPANG: Malaysia conglomerate Capital A said Monday it plans to sell its budget airline AirAsia to its medium-haul affiliate AirAsia X in a bid to streamline operations. Under the terms of the non-binding agreement, AirAsia Malaysia and AirAsia subsidiaries in Cambodia, Thailand, Indonesia and the Philippines would be merged with AirAsia X, it said. The new entity would handle short-, medium- and long-haul flights, Capital A chief executive Tony Fernandes told reporters, enabling the conglomerate to focus on its non-aviation businesses.

"We are going to merge the two airlines and double passenger traffic to 200 million (per year) from about 80 to 90 million currently," Fernandes said. AirAsia has a fleet of 166 A320 and A321 planes while AirAsia X has 17 A330s in operation. The merged airline would start flying new routes to India, Africa, Kazakhstan, and North and South America in 2025, said Fernandes, who also announced he would retire from his position at Capital A in 2028.

"I have been doing it for 22 years. It is the right time to retire," he said. "Leadership is about knowing when to step aside." Shukor Yusof, an analyst with Singapore-based Endau Analytics, told AFP the merger was "natural", but could be a sign of a downturn in the region's aviation sector.

Fernandes, a flamboyant former music industry executive, launched AirAsia as a low-cost airline flying to secondary cities in Southeast Asia, shaking up the region's aviation sector and inspiring a slew of competitors. AirAsia X was launched in 2007 with lofty ambitions to operate long-haul flights, including to Europe. But it suspended flights to London and Paris in 2012 because of rising costs, focusing on core markets like Australia, Japan and China.- AFP