June 17, 2013
Malaysia-based AirAsia X is launching an initial public offering (IPO) to help fund its ambitious fleet and network expansion plans, one of a series of airline sales deals that are shaking up the industry in Southeast Asia.
As well as the AirAsia X move, Thai carrier Nok Air has also recently launched an IPO to support its own growth agenda. And long-time Philippine Airlines majority owner Lucio Tan is considering selling his stake in the carrier to unnamed investors.
But the AirAsia X deal is arguably the most significant. The money raised by the IPO will help the airline silence doubts that a long-haul, low-cost business model is viable. The carrier was forced to withdraw its services to Europe and India in early 2012, although it managed to report a net profit of 33.8 million ringgit ($10.8 million) in the year ended Dec. 31, 2012.
AirAsia X is one of only a handful of low-cost, long-haul operators, according to an independent consultant report cited by AirAsia X. The others are Jetstar and Scoot, with Cebu Pacific expected to join the list later this year. The report finds that “the low-cost model can be challenging to apply to the long-haul market, but recently carriers have found ways to overcome many of the challenges.”
The airline, which is part of the AirAsia group, estimates it will raise $275 million from the IPO. However, external estimates range up to $415 million. The carrier is owned by AirAsia and various investor groups, most of which will see their ownership stake reduced due to a combined share sale and new issuance.
A prospectus for the IPO was officially issued on June 10, when the retail and institutional share offerings were also opened. The retail offering will close on June 19, and the institutional offering on June 24. The company will be listed on July 10.
The retail offering will comprise 10.6% of the enlarged capital of the company, and the offering to institutional investors will comprise 22.7%. Upon listing, the company estimates its market capitalization will be $1.08 billion.