AirAsia's mix of low prices, high fees, and splashy promotions have made it a cross between easyJet and Virgin while at the same time defining a new way to do aviation in Asia. If it can maintain its momentum it won't just be low-cost rivals who need to worry.
Malaysian long-haul budget carrier AirAsia X launched an up to $370 million initial public offering on Monday, seeking funds for its fleet expansion as it targets buoyant travel demand in Asia-Pacific and looks to fend off regional rivals.
The carrier, which competes with Singapore Airlines‘ Scoot and Qantas Airways’ Jetstar, has said it plans to add 13 Airbus A330 wide-bodied planes in total this year and next to take its fleet to 23 aircraft by 2014.
The expansion comes as passenger traffic in the Asia-Pacific region more doubled between 1998 and 2012, putting air travel activity in the region on par with North America, according to figures from research firm Strategic Airport Planning Ltd, which were cited in AirAsia X’s preliminary IPO prospectus.
“The focus in on the sweet-spot flights of 4 to 8, or possibly 9 hours,” Tony Fernandes, AirAsia X’s founder, told reporters at the IPO launch. He added that AirAsia X plans to strengthen its position in its key markets in Australia and East Asia.
AirAsia X and its shareholders are offering 790.1 million shares in an indicative price range for institutional investors of 1.15 ringgit to 1.45 ringgit per share, according to a term sheet of the deal seen by Reuters. About 75 percent of the offering will come from new shares.
The company plans to use 33.3 percent of the proceeds to repay bank loans, with another 32.6 percent set for capital expenditure and 29.7 percent as general working capital.
AirAsia X’s chief executive, Azran Osman Rani, said the carrier’s expansion would come through more flights on existing routes as well as from new routes within some countries where it already operates.
In an interview with Reuters in January, Azran said the carrier was aiming to build brand awareness in new markets like China and Japan and establish crucial early dominance on key routes after dropping its loss-making Europe and India routes last year.
“You want to make sure you are well ahead both in terms of dominating individual routes but also dominating across the networks,” he said then.
CIMB, Credit Suisse, and Maybank were hired as joint global coordinators on the IPO. Barclays, BNP Paribas, Citigroup, CLSA, HSBC and Morgan Stanley are also acting as joint bookrunners.
The deal is scheduled to be priced on June 24, with the stock market debut set for July 10. ($1 = 3.0935 Malaysian ringgits)
Reporting by Siva Sithraputhran; Additional reporting by Stuart Grudgings in Kuala Lumpur, and Vikram Subhedar and Elzio Barreto in Hong Kong; Editing by Chris Gallagher. Copyright (2013) Thomson Reuters. Click for restrictions.
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Photo credit: Fernandes, founder of long-haul carrier AirAsia X, and CEO Osman-Rani hold a newly launched AirAsia X Prospectus as they pose during its launch ceremony in Kuala Lumpur. Bazuki Muhammad / Reuters