AirAsia eyes Thai and Indonesian IPOs

25th Feb 2011
AirAsia eyes Thai and Indonesian IPOs

Malaysian budget carrier AirAsia is planning initial public offerings for its Indonesian and Thai operations to raise cash for expansion in both territories. Tony Fernandes, founder and chief executive, also said that the airline was close to receiving regulatory approval to start a third subsidiary in the Philippines.

Fernandes, who founded AirAsia in 1993, said the Indonesian IPO might aim to raise between US$150m and US$200m. But he did not put a figure on the Thailand IPO, noting that both offerings could be affected by market turbulence caused by events in the Middle East.

He said the listings would take place in Jakarta and Bangkok by the fourth quarter of this year, subject to market conditions.

He told the Financial Times that the IPOs were intended “to build a war chest” for future expansion, including expanding the fleet to expand operations in both markets and raise long-term profitability.

“We want to value this correctly and not overvalue it,” he said. “The aim is to get some cash into the business and realise the massive potential.”


A number of other Asian carriers have also sought listings over the past year, including Singapore’s Tiger Airways, Cebu Pacific of the Philippines and Garuda Indonesia, the national flag carrier. Vietnam Airlines, the national carrier, has also voiced its interest in listing.

Fernandes also issued a caution over the impact of unrest in North Africa and the Middle East on oil prices.

“These could have an effect on the price of oil. We’re monitoring the situation very closely. We already have short term [fuel] hedges in place up to the second quarter of 2011, and we will add more if the situation warrants it.

“We are determined to keep fares low, and have the option of imposing a fuel charge or raising fares. Thanks to our ancillary initiatives, we are in a better position than our competitors when it comes to making these decisions, as we have a lot more latitude than they have,” he said.

AirAsia more than doubled net profit to a $345.7m in the year to December, with revenues up 25 percent, in spite of a 30 percent rise in the price of jet fuel.

Fernandes said he was “confident” that the airline could continue to make significant profits even if oil prices rose further. “We are comfortable about maintaining good margins up to about $150 [a barrel] for oil,” he said.

AirAsia was considering paying its first dividend from the 2010 profits according to Fernandes. But some institutional investors had put his airline under pressure to start paying dividends. The board is expected to make a decision next month.

The group has 93 aircraft in operation, mostly Airbus A320s, with 86 on order for delivery by 2015. The airline is in discussions with Airbus to buy up to 150 more aircraft, some of which would be replacements.



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