AirAsia to raise RM800 million from IPO

Malaysia low-cost carrier AirAsia expects to raise RM800 million (US$211 million) from its initial public offering (IPO) for listing on the main board of Bursa Malaysia (Stock Exchange of Malaysia) scheduled for end November.

This would make AirAsia’s offering the biggest in the country this year after KLCC Property Holdings Bhd’s RM766 million offering in August.

AirAsia will offer 700 million shares at RM1.40 per share. Of these, 23 million are for directors and employees in the company, 116 million shares for the public and 560 million for institutional investors by way of book building exercise.

The listing exercise will expand the company’s paid-up capital to expand to RM223 million from its current RM175 million.

Tune Air Sdn Bhd currently owes 64.6 percent of AirAsia. After listing on the main board of Bursa Malaysia Tune Air will hold 44.8 percent in AirAsia.

AirAsia is expected to issue its prospectus later this month.

At the underwriting ceremony early this month, AirAsia’s group chief executive officer, Tony Fernandes, said that the proceeds from the IPO would be used for working capital and aircraft acquisition.

AirAsia has put up a proposal to Airbus and Boeing to buy 80 aircraft over the next few years. Currently, the LCC has 24 aircraft.

Fernandes also revealed AirAsia would fly to China next. It is presently evaluating various destinations on the Chinese mainland.

AirAsia, which flies to various destinations in Malaysia, Thailand and Indonesia, enjoys an average passenger load factor of 86 percent.

For its financial year ended June 2004 it recorded a pre-tax profit of RM58 million and net profit of RM49 million.

Recent developments have seen Malaysia Airlines and low-cost carrier AirAsia agreeing to put aside their differences and work together in the interest of the nation and the aviation industry.

This decision was reached at a close door meeting this month presided by Transport minister, Datuk Seri Chan Kong Choy. He called for the meeting following a local media report quoting MAS’ willingness to work with AirAsia for mutual benefit.

The minister had given the two airlines one month to come up with a concrete plan to co-operate in common areas such as marketing, engineering, ground handling, spare parts procurement, and maintenance.

Chan did not give full details of the meeting but described it as “cordial and friendly”. He believes that as long as the two airlines are willing to work together it will benefit everyone, from shareholders to travellers.

It is believed the meeting discussed issues facing the two airlines such as reopening Subang airport for LCCs and the proposal to hive MAS’ domestic routes to AirAsia.

The government has not made any decision on Subang airport. The issue of Subang was one of the bones of contention between MAS and AirAsia, with the former against the latter’s proposal to turn Subang into a budget aviation hub.

The carrrier forecast 7.5 million passengers next year.

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