Low-cost carrier AirAsia, together with a partner firm, has inked an agreement to acquire Indonesian carrier Batavia Air, in a move that will allow it to capture a bigger portion of the growing Indonesian market.

Under the conditional share sale agreement, AirAsia and trading firm Fersindo Nusaperkasa, which owns a 51% stake in AirAsia Indonesia, will acquire Metro Batavia for $80 million in cash. Metro Batavia operates both Batavia Air and aviation training school Aero Flying Institute.

AirAsia will hold a 49% stake in the deal while Fersindo will hold the majority 51%.

The acquisition will be carried out in two phases - first a buyout of a 76.95% stake followed by the remaining 23.05%, AirAsia said in a statement.

The deal is expected to be concluded by the second quarter of 2013, subject to Indonesian regulatory approvals.

It will also increase AirAsia's competitiveness in a market crowded with LCCs such as Lion Air, Mandala Air and Citilink.

"The addition of Batavia Air will provide AirAsia immediate access to an enlarged fleet of aircraft, experienced pilots and flight crew and increasingly competitive slots at major Indonesian airports at a time when Indonesia's travel sector is experiencing double-digit growth," says AirAsia.

The acquisition of Batavia will provide greater domestic connectivity and an extensive feeder network into AirAsia Indonesia's existing hubs in Jakarta, Bandung, Denpasar, Medan and Surabaya. Once complete, the two airlines will together be able to fly more than 14 million passengers to 42 Indonesian destinations, AirAsia says.

Batavia Air operates a fleet of 33 737s, A320s and A330 aircraft.

"The Batavia Air acquisition is a fantastic opportunity for AirAsia to accelerate our growth plans in one of the most exciting aviation markets in Asia and further underlines our belief in the growth potential of Indonesia's aviation sector," says AirAsia group chief executive Tony Fernandes.

Fernandes recently relocated to Jakarta, where he is leading the carrier's regional office to focus on growth in the region.

Source: Air Transport Intelligence news