AirAsia Bhd has scrapped its US$80 million takeover bid for Indonesia’s Batavia Air and will instead enter into a collaboration deal with the carrier that encompasses ground handling, distribution and inventory systems.

“After extensive study and discussion, the diverse nature of the two businesses has prompted an alteration to the initial agreement. The precise scale of integration, including a re-fleeting exercise as well as streamlining an amalgamation of cultures is expected to take up considerable time and effort, joint resources which can be more efficiently utilised in a targeted manner,” the airline said in a statement.

Tan Sri Tony Fernandes, AirAsia group CEO (pictured right), also cited timing as the reason for the change in plans, saying it was “perhaps not appropriate as it would have induced too many risks and would ultimately be earnings dilutive to our shareholders”.

He, however, does not see the scrapping of the deal as a setback for his group. Instead AirAsia’s aggressive focus in Indonesia remains. “We will push our Indonesian IPO plans while still maintaining close co-operation with Batavia Air.”

Under the new tie-up a separate aviation training joint venture with classroom, fixed-wing and simulation training facilities will be immediately established between AirAsia and AirAsia Indonesia to address an anticipated skilled pilot shortage in Indonesia.

“All parties are fully committed to ensuring that the proposed collaboration will be in compliance of all relevant local competitions regulations.”

AirAsia Indonesia CEO Dharmadi added the airline would now focus on accelerating its fleet expansion starting from 2013, and looking at tripling its fleet size in the next five years.

The airline will also upgrade its sales and distribution system.

To recap, on 26 July 2012 AirAsia and Indonesian partner PT Fersindo Nusaperkasa entered into a conditional share sale agreement to acquire Metro Batavia, which operates Batavia Air and Aero Flyer Institute, an aviation training school, in a cash deal worth US$80 million. (Read story here)

From the start the deal faced problems with reports that the Indonesian government might cancel the purchase due to ownership concerns. (Read story here)