AirAsia X’s financing for planes on track, says Azran

KUALA LUMPUR: AirAsia X Sdn Bhd is confident in meeting the financial obligations for the purchase of 25 new Airbus A330 planes.

“Since April 2008, we have well in excess of RM300 million cash in hand, including cash from our foreign equity partners. We have been operating on positive cash flows and are confident that we could continue to raise funds in Europe as banks have to continue lending,” AirAsia X chief executive officer Azran Osman-Rani said.

“The plan for equity financing will proceed as planned, and we are eyeing 2010 for a possible IPO (initial price offer) or through private placements to our existing shareholders

He was speaking to reporters on board its first Airbus A330 last Friday en route here from Toulouse, France, where the aircraft was delivered to AirAsia X.

The Airbus A330-300 ordered by AirAsia X carry a catalog price tag of US$200 million (RM704 million) each or US$5 billion in total, though discounts are usually given for large orders. The delivery period of the plane is from the end of last month to 2013.

Azran said the ability to raise funds for the purchase of new planes was crucial for AirAsia X to grow. “With these new planes, we would probably be profitable by December and start registering full-year profit beginning next financial year,” he said.

Azran pointed out that the A330 could help the airline maintain its low-cost advantage, with its operating cost forecast to go down from four US cents per km now to 3.6 and 3.3 cents for next year and 2010, respectively.

“This is why we felt that the planes we are purchasing now are very important to ensure that we stay ahead of our competitors. We are one of the first airlines to phase out the Boeing 747 that burns around 15% more fuel and costs 15% more in maintenance,” he said.

According to Azran, aircraft financing is very specialised and very few Asian financial institutions have experience in it. However, he added that the company would try to convince Malaysian financiers that AirAsia X’s business model was viable.

Foreign shareholdings in AirAsia X now stand at 36%, comprising 16% held by Virgin Air Ltd and 10% each by Orix Group from Japan and Perigon Capital of Bahrain.

To another question, Azran said the long-haul budget carrier was going ahead with its route expansion to Japan, United Kingdom and continental Europe despite concerns that the possible visa ruling by the UK government could complicate matters.

“We are making progress on these issues and from the feedback we received, we are confident that Malaysia will pass the test,” he said, referring to the six-month grace period given until the end of the year by the British government for Malaysia to cut down the number of its citizens abusing the visa-free privilege by overstaying in the country.