SEPANG, June 8 — AirAsia X is eyeing a public listing in the second half of 2011 subject to market conditions the airline said today.
AirAsia X will restructure itself to become a stand -alone airline and take over employment of its own wide body pilots, cabin crew and ground staff.
“The new model will allow both AirAsia Berhad and AirAsia X to pursue a clearer and more focused business strategy,” AirAsia said in a press release today.
The announcement today will allay the concerns of AirAsia’s investors that the company is funding the growth of the unlisted AirAsia X and in the process take on more debt.
AirAsia group CEO Datuk Seri Tony Fernandes acknowledged today that investors were concerned over speculation that AirAsia and AirAsia X would be merged and wanted to make it clear that AirAsia would not be funding AirAsia X.
“There has been an overhang on AirAsia and whether AirAsia is going to take on the financing of the aggressive expansion of AirAsia X,” he said in a press conference. “This is a very clear line and will give clarity to the investment community,”
No further details as to the planned IPO were made available but AirAsia X CEO Azran Osman Rani said that funds raised from the IPO would be used to fund the fleet expansion.
AirAsia deputy group CEO Datuk Kamaruddin Meranun will also take on a greater role in the running of AirAsia X while Fernandes will focus on AirAsia.
AirAsia X’s gearing stands at 260 per cent and according to Fernandes, the total debt is about RM1 billion.
The airline made RM720 million in audited revenues last year and aims to double the figure this year. Net profit last year was RM87 million and the airline is targetting a net profit margin of 7 per cent this year. It recorded a load factor of 77 per cent in 2009.
AirAsia X also just completed an RM100 million rights issue which will help reduce its debt.
“The rights issue is a precursor to the IPO,” said Fernandes. “We solved this issue of lack of focus.”
He added that AirAsia and AirAsia X may profit share on some routes although AirAsia will focus on destinations below four hours of flight time.
“We’re doing things that people are asking us to do and we’re also doing things that people didn’t ask us to do and now they’re seeing the reason for why we did it,” he added. “Would investors have supported AirAsia supporting AirAsia X? But now AirAsia X is going to really contribute. In the months to come you will see Thai AirAsia and Indonesia AirAsia really contribute to our bottom line.”
Fernandes also defended AirAsia’s gearing saying that it was necessary to fund expansion. AirAsia has a net gearing ratio of 2.25 and is looking to slow down aircraft delivery to maintain its gearing levels and transfer the debt for its Thai and Indonesian operations back to the respective countries.
“If I had listened to analysts and had five planes a year, Tiger (Airways) would crush us by now, But now I can slow down our growth because we have reached a size where no one can touch us,” he said. “So we’ve listened where we think it makes sense and we haven’t listened where we think it doesn’t. Now I think it’s all coming together in very strong cocktail.”
Azran said that AirAsia X received approval from the Malaysian authorities to fly to Tokyo but is still waiting from approval from Japanese authorities. He added that the airline is also evaluating the possibility of flying to either France of Germany early next year as well as restarting some middle east routes.
He said that AirAsia X hopes to start flying to Seoul by the fourth quarter of the year.
Fernandes said that AirAsia X and AirAsia combined could eventually be as large as Singapore Airlines.
“If you look at Cathay and Singapore Airlines, they do not have the connections that AirAsia provides (to AirAsia X),” he said.
AirAsia X currently operates a fleet of eight aircraft - six A330s and 2 A430s. It will be taking delivery of three more A330s by the end of the year. It has also ordered another 17 A330s and 10 A350s to be delivered from next year till 2020.
Azran said that AirAsia X is not looking at buying any A380s.
AirAsia has a 16 per cent stake in AirAsia X with an option to increase it to 30 per cent.
The other shareholders of AirAsia X are Aero Ventures Sdn Bhd with 48 per cent, the Virgin Group with 16 per cent, while Bahrain-based Manara Consortium and Japan-based Orix Corp hold the remaining 20 per cent.
Aero Ventures is owned by Fernandes, Kamarudin, Datuk Kalimullah Hassan, Lim Kian Onn and former Air Canada chairman and CEO Robert Milton.
Fernandes and Meranun are the controlling shareholders of AirAsia with a 30.7 per cent stake via Tune Air Sdn Bhd.
While AirAsia X is pursuing the strategy of becoming a stand-alone airline, the airline will continue to use the AirAsia brand as part of its 30-year brand licence agreement and the airasia.com ticket booking website which will allow single ticketing of AirAsia and AirAsia X flights from July.
“People flying from Perth to Bangkok can now buy one itinerary,” said Fernandes.
Kamaruddin cuts his birthday cake, flanked by Azran, with Fernandes (centre) looking on. - Picture by Lee Wei Lian
By Lee Wei Lian