Two Malaysian companies have agreed to explore establishing a budget airline that would use the brand name of Garuda Indonesia's low-cost arm Citilink.
Radio frequency identification company SMTrack will acquire a 60% stake in Citilink's Malaysian general sales agent, Dexma Express, for MYR2.8 million ($680,600).
Dexma will then rebrand as Citilink Malaysia, prepare a term sheet and business plan, along with its financial projections and valuation for SMTrack. Work to acquire licences, permits, and an air operator's certificate will also be undertaken during this period.
Sometime before July, a separate share sale agreement between SMTrack and Citilink will be made, where the airline "will undertake to provide proof of funds".
It is unclear as to what percentage of shares Citilink will own in Citilink Malaysia. Citilink did not respond to FlightGlobal's request for comment on the Malaysian operations.
SMTrack explains in a stock exchange statement that the deal allows three companies to "open up to each other in respect of the potential investment in Citilink Malaysia's operation".
An SMTrack official was quoted in a 15 April New Straits Times report as saying that the new airline is "expected to start operations in the second quarter of 2019," where it will first operate services within southeast Asia.
"Our first route will be from Kuala Lumpur to Phnom Penh, Cambodia. Outside of the ASEAN countries, we will soon target China," the SMTrack official Jay Hoo was quoted as saying in the report.
It appears likely that Citilink will transfer some of the 51 Airbus A320s it operates to the Malaysian unit, although the carrier also has two ATR 72-600s in service and five Boeing 737-300s and -500s in storage.