AirAsia X to Diversify Financing as Hedge Against Currency Volatility
Asia is now the world’s largest aviation market, and as AirAsia X expands and seeks to manage its fleet, the low cost carrier wants to ensure it can handle currency fluctuations, as well.
AirAsia X Bhd., the long-haul budget carrier owned by AirAsia Bhd., is looking to raise yen- denominated funds for the first time as it prepares to take delivery of seven aircraft next year.
The company is in talks with Japanese institutions to finance one or two aircraft it will add to its fleet next year, Azran Osman-Rani, AirAsia X’s chief executive officer, said in an interview in Seoul. The move is aimed at diversifying the funding to minimize impact from currency volatility, he said.
“Yen is, of course, something we are very interested in,” Azran said. “That’s because 15 percent of our business is in Japan. We have yen receivables.”
AirAsia X raised 988 million ringgit ($299 million) in an initial public offering in June to help finance its expansion plan. Some 15 low-fare carriers started flying in the past decade across the Asia-Pacific region, the most profitable market worldwide for at least the fourth consecutive year, according to the International Air Transport Association.
The airline, based at Sepang, Malaysia, paid for three aircraft that were delivered this year in ringgit as it focused on better management of costs, Azran said.
AirAsia X carried 697,112 passengers in the second quarter, 20 percent more than a year earlier, filling 81.8 percent of its seats, the airline said in a statement last month. Traffic demand in the period increased 14 percent.
The carrier’s fleet will increase to 18 by the end of this year and 25 in 2014, Azran said. It had 12 Airbus SAS A330s on its fleet at the end of June.
AirAsia X shares fell 0.9 percent to 1.05 ringgit as of 10:15 a.m. in Kuala Lumpur. The stock has declined 16 percent since its July 10 debut, compared with a 2.4 percent drop in the benchmark FTSE Bursa Malaysia KLCI Index during the same period.
The carrier plans to double its size in key markets, including China and Australia, by offering more frequencies on existing flights and adding new destinations within those countries, Azran said.
The airline expects the number of passengers traveling between North Asia and Southeast Asia and Australia on low-cost carriers will grow fivefold in the next five years as economic growth enables more people to travel by air, Azran said.
Most of Southeast Asia’s 600 million people — about the combined population of the U.S., Germany and Brazil — will be middle class by 2020, and that will boost demand for food, beverages and other goods, according to Bain & Co.
Budget carriers’ market share in the Asia-Pacific region rose to 24 percent last year from 1.1 percent in 2001, according to the CAPA Centre for Aviation, an industry consultancy.
Asia-Pacific region overtook North America as the world’s biggest aviation market in 2009, according to IATA. The region is expected to add about 380 million travelers, including domestic and international, between 2012 and 2016 to 1.2 billion, IATA forecast in December.
–With assistance from Kyunghee Park in Singapore. Editors: Suresh Seshadri, Subramaniam Sharma
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