In the prospectus, AirAsia X outlines that the proceeds of the IPO will be split between repaying bank debt, capital expenditure and general working capital. More specifically, it will repay lending that financed security deposits on new aircraft under operating leases in 2013 and 2014. Reducing the debt level will also provide the carrier the “flexibility to fund our expansion of operations and to raise financing as and when attractive opportunities arise.”
AirAsia X currently operates a fleet of 10 Airbus A330-300s, and has two A340-300s that are wet-leased to other operators. The airline has taken delivery of another A330, which is due to begin operations in July. Its average fleet age as of March was 4.9 years.
A further 22 A330-300s are due for delivery by 2017, and AirAsia X also has a firm order for 10 A350-900s for delivery from 2018. Five of the A330s are scheduled to be delivered in 2013, and seven in 2014.
The carrier flies to 14 destinations across Asia and Australia, and one in the Middle East. A 15th destination, Busan, is to be added in July. It also taps into the extensive short-haul network operated by the rest of the AirAsia group.
The airline's hub at Kuala Lumpur International Airport offers considerable growth opportunities for its business model, the carrier says in the prospectus. It claims its hub has the largest low-cost-carrier feeder network of any airport in the Asia-Pacific region, in terms of flight frequencies and destinations, but it is under-served for long-haul routes.
Network expansion will come partly from increasing frequency on existing routes. The airline says that 12 of its 14 destinations are major metropolitan cities where it could profitably boost frequencies to twice daily. Load factors on each of these routes are already above 80%. The carrier plans to increase its Sydney, Melbourne, Perth and Taipei flights to double-daily this year.
New routes in existing markets are also being targeted. These include Adelaide in Australia, Nagoya and Fukuoka in Japan, and Chongqing and Xian in China.
Also, there are “several potential new markets” in South and Central Asia, North Africa and Eastern Europe “that are within a commercially viable flying radius” for A330-300s from Kuala Lumpur, the carrier notes. The arrival of the A350s will add even more potential destinations.
AirAsia X says it plans to establish new hubs in countries such as Indonesia, Thailand, Japan and the Philippines—locations where it can “leverage the existing presence” of the short-haul operations of the AirAsia group for feeder traffic. The first of these is expected to be in Thailand, using AirAsia X's newly established associated company Thai AAX Co. Ltd.