Buy Offers Swamp Zest Air
By BERNIE CAHILES-MAGKILAT
October 3, 2012, 4:50pm
MANILA, Philippines — Debt-laden low-cost carrier Zest Air has been swamped with interests from local and foreign airlines including legacy flag carrier Philippine Airlines, leading budget airline Cebu Pacific and China’s Hainan Air as the Zesto Group is willing to sell the airline “lock, stock and barrel.”

A source privy to the plan said the Zesto Group, which owns Zest Air, has received calls from these parties expressing interest in the airline and that the sale of Zest Air could be concluded before end of this year.

The source said that the Yao Group, which owns Zesto, has incurred huge debts since it acquired the airline. The source refused to give the exact debt, but said, it could run into billions of pesos.

Ramon S. Ang of PAL, the source said that could be doing their own due diligence while Cebu Pacific’s Lance Gokongwei already called a Zest Air official expressing interest about the company’s plan.

The source could only surmise that if Ang will get Zest Air, the San Miguel Corporation’s growth architect may combine Air Philippines, its low cost carrier, may be folded into PAL to augment its fleet as a full-serviced airline. Ang may maintain Zest Air as its low cost airline.

The source said, that while the Yao Group, which owns Zest Air, is willing to totally unload its interest, it will really depend on the buyer.

He said that based on Ang’s management, he would like to retain the old owners in the board for continuity sake and to ensure accountability.

“There are lots of things going inside a newly acquired asset so some new owners would like to keep the old owners in the new management,” the source. This is also a way to be able to make the old owners responsible.

The source, however, said that in the case of tycoon Lucio Tan, it has been evident that the tycoon has already relinquished most of his roles in PAL to Ang’s shrewd management. Ang has been credited to the successful diversification of SMC, which is no longer a food and beverage conglomerate, but is now a major player in energy, telecommunications, airline, and infrastructure sectors.

Ang has not stopped his buying expedition that he has not said no to anything being offered to him. His newest acquisition in PAL has fueled his interest for a possible new airport in Bulacan. A possible airport runway at the Amari property along Coastal in Paranaque was also raised.

In the case of Cebu Pacific, the source said that the Gokongwei group is bent on cementing its hold in the low cost market with the acquisition of Zest Air, which has firm grip on some missionary routes that Cebu Air has not flown yet.

The memorandum of understanding between the Zesto Group and Hainan Airlines for the latter to acquire majority stake in Zest Air has not really taken off the ground, although the Chinese Airline has remained interested in acquiring Zest Air. This leaves more room for the Zesto Group to open its doors to other parties.

“All these parties are serious buyers,” the source said.

Zest Air chairman Donald Dee had confirmed strong interests from other airlines and the only main consideration is price.

“It should be an offer we cannot refuse,” Dee said.

Among the factors that make Zest Air attractive is it has landing rights in Manila where the government has stopped granting new landing rights.

Zest Air has also the youngest fleet of A320s. It will have a total of 14 leased planes by end this year. It has an average load factor of 70 percent on the routes it flies into.

It flies to China, Korea and soon in Kuala Lumpur. There are proposals for them to fly to Japan and other southeast Asian destinations. The company is also looking at medium to long haul flights including the Middle East markets.

Domestically, the budget carrier flies to Boracay via Kalibo, Bacolod, Busuanga, Calbayog, Catarman, Cebu, Davao, Iloilo, Legazpi, Marinduque, Masbate, Puerto Princesa, San Fernando, San Jose, Tablas, Tacloban, Tagbilaran and Virac.

Zest Air started operations in 1996 when it acquired the formerly Asian Spirit, which owned by a cooperative. It was renamed to Zest Air in September 2008 to carry the flagship corporate name Zesto.

The Zesto Group has huge interests in ready-to-drink beverages, banking, food, chemicals, among others.
http://www.mb.com.ph/articles/375789...swamp-zest-air