When Expedia and AirAsia formed their 50/50 joint venture in 2011, they called it a “happy marriage”. Well, we guess now it can be called a happier marriage because with today’s announcement that Expedia has increased its stake in AAE Travel to 75%, both parties do end up happier as a result.
AirAsia is happy because it’s gotten a good return for its investment. Expedia is paying it a cash consideration of US$86.3 million for its 25% share. It is understood its initial investment in the JV was around US$5 million.
AirAsia-Expedia has seen healthy growth since starting in 2011. (Image credit: expedia.com.sg)
Expedia meanwhile gets more control of a business in a region that’s important to its strategic goal and is growing well. Because as “happy” as everyone says they are in a 50/50 joint venture, it’s hard to drive a car with two drivers who’ve got equal say and who may have different business philosophies vis-à-vis growth vs immediate profit.
Expedia has always reiterated its strategy of global expansion lies in pursuing growth and building a brand for the long term. For AirAsia, whose confidence has been dealt a serious blow by the recent crash of QZ8501, distribution is not its core business.
This latest development paves the way for Expedia to be more aggressive in the region and to continue to put more resources into the business unit. In the last two years, since former AirAsia’s commercial head Kathleen Tan assumed the reins of AAE Travel, the joint venture has seen healthy growth, scaling in both South-east and North Asia.
More resources have been committed to the region including building up its content pipeline and including more content that’s relevant to customers in Asia as well as building up its technology and product resources.
It is clear Expedia is on a growth path. Its acquisition of Wotif consolidates its position in the Australiasian market and its most recent purchase of Orbitz, followed by Travelocity, gives it a firmer footing from which to expand globally.
Dara Khosrowshahi: Partnership with AirAsia instrumental in expanding Expedia’s business in the region. (Image credit: expediainc.com)
Dara Khosrowshahi, president and chief executive officer of Expedia, Inc. said: “Asia continues to be a fast-paced, growing market, and partnering with a powerful brand like AirAsia has been instrumental in driving the expansion of our business in the region. We continue to value and look forward to a great ongoing relationship with them as we bring our world-class technology and supply to travellers across Asia.”
Tan Sri Tony Fernandes. AirAsia group CEO said the two companies have “built a fantastic business” since starting the JV in 2011.
“The vision of marrying Expedia, a globally recognised and highly regarded travel agency, with the AirAsia group network has yielded a significant return in just over three years.”
Fernandes added that AirAsia “remains committed as partners as Expedia continues to develop in this region, and this agreement will simultaneously allow for the AirAsia group to further develop and diversify its distribution network.”
The transaction is expected to close in the first half of 2015.
• Featured image credit (AirAsia Expedia aircraft): Wikimedia Commons
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