AirAsia X Prepares to Float Shares To Fund Expansion

 - June 6, 2011, 6:45 AM
AirAsia X chief executive Azran Osman Rani seeks to raise up to $330 million in a share flotation to fund expansion plans. (Photo: Air Asia)

Budget long-haul airline AirAsia X is eyeing a stock market listing and fleet expansion to spread its wings across the globe. The Malaysia-based carrier’s chief executive, Azran Osman Rani, has been in talks with institutional investors about a flotation in the next year or two to fund growth. According to sources in the Kuala Lumpur financial community, the company aims to raise up to $330 million through the initial public offering (IPO).

Osman Rani, who visited London last month for the negotiations, said the talks are at an early stage and the carrier was still choosing investment banks to help with the IPO. He declined to say where or when the group might list.

The airline, owned by tycoon Sir Richard Branson and Air Asia boss Tony Fernandes among others, is buying 29 Airbus A330-300s worth about $3 billion to expand services from southeast Asia, but may order more for its longer-term ambitions.

AirAsia X hopes to launch flights to cities like Manchester, UK; Nice, France; Osaka, Japan; and Sydney, Australia, in the short term and eventually link continents such as South America and Africa. “The 29 new aircraft will cover most of the growth from southeast Asia to the rest of the world, but there are probably more opportunities beyond that,” Osman Rani said.

The airline launched in 2007 with flights to Australia and now runs 11 aircraft to 15 destinations, including London, Tehran, Paris, Seoul and Tokyo, as well as China, India and Australia. The group claims to be the first long-haul airline to emulate budget carriers, such as Southwest Airlines in the U.S. and Europe’s easyJet, Ryanair and Air Berlin.

Osman Rani said the carrier has slashed its costs to less than half those of long-haul rivals by charging for meals and in-flight entertainment, while still offering long-haul benefits like adjustable seats. It has also benefited from offering connections with the Asian short-haul network of sister airline Air Asia. Air Asia’s Fernandes has shrugged off Singapore Airlines’ plan to set up a budget long-haul rival, saying he is unconcerned about fresh competition.

Branson owns a tenth of AirAsia X, Japanese investor Orix and Middle East investors each own 11 percent, Air Asia owns 16 percent and the balance is owned by Fernandes and others.