Malaysian long-haul carrier AirAsia X said on June 10it plans use cash from a public listing worth up to $418 million to more than triple its Airbus fleet and expand routes to meet demand in Asia-Pacific. The budget carrier founded by aviation tycoon Tony Fernandes hopes to raise the proceeds in an initial public offering (IPO) ahead of its July 10 debut on the Malaysian bourse.
"The estimated amount based on the 1.45 ringgit ($0.46) per issue share is between 1.1 billion ringgit and 1.3 billion ringgit," Nazir Razak, head of banking group CIMB which is running the IPO, told reporters after the prospectus launch.
Analysts have said with last month's general election over, investors are looking for a wide range of stocks in Southeast Asia's third largest economy, sparking a fundraising fever in Malaysia.
AirAsia X chief executive Azran Osman Rani said the proceeds from the IPO would finance fleet and route expansion to cement its position in its core markets in Australia and Asia.
The carrier will take delivery of 23 Airbus A330-300 planes over the next four years beginning in July, while it has also placed a firm order for 10 A350-900s.
Detailing the airline's strategy, Azran said it will bolster its position in lucrative markets like Australia, China, Taiwan, Korea and Japan.
It would be followed by adding frequencies to current routes, opening new destinations including to Adelaide in Australia, Nagoya and Fukuoka in Japan and Busan in South Korea.
AirAsia X previously scrapped London flights because of the European debt crisis and focused on serving routes within Asia-Pacific, where sustained economic growth has swelled the middle class.
AirAsia X currently has 10 Airbus A330-300 planes and serves 14 routes across the region, including destinations in Australia, China, Japan and Saudi Arabia.
Azran also said with the arrival of more aircraft it would allow the airline to set up hubs in Thailand and Indonesia.
A hub in Thailand will allow AirAsia X to operate regular services from Bangkok to lucrative markets such as Australia, Japan and South Korea.
A third of the funds raised in the listing will be used to repay debt while another third is slated for capital expenditure, with the balance going to working capital and listing expenses.
Shukor Yusof, an aviation analyst with Standard & Poor's Equity Research in Singapore, has predicted the AirAsia X listing will be a success and the cash raised was "a good start to fund their fleet expansion".
AirAsia X said the IPO could raise 859 million ringgit (US $277 million) from the sale of 592.6 million new shares for between 1.15 to 1.45 ringgit each. Current stakeholders are also selling 197.5 million existing shares with an overallotment option of up to 15 percent of the 790.1 million shares on offer. The International Air Transport Association (IATA) has described Asia-Pacific as the world's fastest growing market, with passenger traffic more than doubling since 1998, despite fuel costs surging 55 percent since 2006.
Meanwhile Fernandes dismissed the threat posed by Malindo Airways, an affiliate of Indonesia's budget carrier Lion Air, citing AirAsia's position as Asia's largest budget carrier with a strong balance sheet.
"We are in a very strong position. It will be tough for new airlines or future entrants into the market," he said.
Malindo Airways, however, has already sparked a price war by offering competitive fares with free snacks and luggage allowance. It currently serves domestic routes. Profit-making AirAsia was Asia's first low-cost carrier to complete an IPO in 2004.
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