Tune Hotels Co-Founder Tony Fernandes Says They're Coming To America

22 September 2009

On Sunday, we were lucky enough to get mogul Tony Fernandes on the phone to discuss a few things surrounding the arrival of his Air Asia X airline on US soil. He also happens to be the man behind the Kuala Lumpur-based chain of budget Tune Hotels.

While we were discussing the likelihood of the US seeing cheap flights to Southeast Asia on Air Asia X, we didn't forget to slip in a few questions regarding if Tune Hotels would come along for the ride.

And here's what Tony said...

Tune Hotels are "very definitely" coming to the United States in the near future (we're talking like two years here). Tune being just "as big a brand as Air Asia," it's also a brand "that could travel anywhere in the world."

Catering to the budget-minded Holiday Inn-type customer, Tune is even more no-frills, but then you save quite a bit of money by choosing Tune. Nightly rates average $20, but like a low-cost airline, you'll incur extra charges for add-ons (internet, towel rental, air conditioning). One of our HotelChatter reporters took the Tune Hotel challenge at the Kuala Lumpur flagship back in March, and spent only $104 for three nights in a double room with those extras.

As it stands right now, the seven Tune hotels are only to be found in Malaysia and Indonesia, and even those Indonesia ones (in Bali, of course) are brand-spanking new. Still, Tony Fernandes has his eyes set on the prize, and that is worldwide proliferation of the Tune Hotel and Air Asia brands, in the maverick spirit of his former boss Richard Branson.

Airasia X at nearly 100% online penetration in Oz.

22 September 2009

Not only has AirAsia X, the low cost long haul carrier affiliated with AirAsia, enjoyed strong customer response in Australia but it has also managed to achieve nearly 100% online penetration for its sales in that market.

General Manager of AirAsia X in Australia, Darren Wright, soon to be part of strongest ever airline panel at WIT, told WIT-Web In Travel that the airline is now carrying more than 29,000 passengers a month on its Australian routes and is growing from strength to strength.

AirAsia X launched the first low cost service from Kuala Lumpur to Australia’s Gold Coast in November 2007. The airline has since extended its Australian network to cover Perth and Melbourne (Tullamarine).

In a recent interview with WIT, available on podcast at webintravel.com, Wright said that up to 98% of AirAsia X’s bookings in Australia are made via the website.

He said that Jetstar and Virgin Blue had trained consumers to buy direct for domestic flights and as such, buying direct for international flights on AirAsia X has not been such a stretch. The biggest challenge the airline has faced is persuading consumers to buy each leg of their journey as a separate ticket.

Wright, who will be speaking at the WIT conference on Oct 20-23 in Singapore, said that Australians were quite mature when it comes to buying with a credit card online and therefore it has not been forced to provide cash payment facilities in the way that the parent company has to in Asia for example.

Instead, AirAsia X is broadening its credit offering through partnerships with PayPal and American Express.

Wright will be part of the airline panel at WIT which will be moderated by Gordon Locke, Vice President, Airline Marketing & Strategy, Sabre Airline Solutions & Sabre Travel Network.

It is WIT’s strongest airline panel yet featuring first, a one-on-one interview with Dr Amin Khan, Senior General Manager, Network & Revenue Management, Malaysia Airlines and second, a panel comprising, along with Wright, Chong Phit Lian, CEO of Jetstar Asia, Gerry Oh, Regional Vice President, South-east Asia & Australasia, Jet Airways (India) and Peter Wiesner, Senior Vice President-Marketing, Bangkok Airways.

The session will address how airlines are managing their business amid the “Stormy Skies” and how they are balancing between the need to cut costs while growing revenues through additional streams and new channels.

AirAsia goes inter from Phuket

22 September 2009

Thai AirAsia is opening a second base in Phuket for international services at a time when much of the aviation industry remains in the doldrums and some airlines are making cutbacks.

Thai AirAsia staff last Friday celebrate receiving the airline’s 10th brand new Airbus A320 at Suvarnabhumi Airport.

As part of an aggressive growth strategy the no-frills carrier has firmed up plans to link the southern resort island with four major regional cities from November.

The airline now has a single international service to and from Phuket-Singapore, and flights to Bangkok.

Thai AirAsia will introduce daily flights from Phuket to Jakarta and to Hong Kong from about mid-November. Daily services to Ho Chi Minh City and Medan will start a month later, said chief executive Tassapon Bijleveld.

The airline will station two A320 jetliners, each capable of carrying 180 passengers, at Phuket International Airport and will set up a crew centre and an aircraft maintenance support base there. Plans are under way for the airline to set up a third Thai hub in Chiang Mai next year to tap alternative traffic opportunities to its Bangkok base.

Phuket offers promising traffic potential, especially from those who want to travel directly to and from the island, said Mr Tassapon.

"There are risks involved in opening the Phuket base but they are calculated ones," he told the Bangkok Post.

Having additional hubs to Bangkok increases the airline's options for keeping its passenger traffic flowing through Thailand, particularly if Bangkok encounters political troubles like the blockade of Bangkok's two airports late last year.

Depending on the response to its international services through Phuket, the carrier may connect the island with cities in the Philippines and India, where it plans to establish a foothold next year.

The airline brought its 10th brand new Airbus A320 jetliner into service last Friday, and is due to take delivery of the 11th in December.

Thai AirAsia is due to start a new route - Bangkok-Taipei - on Friday and to begin a second daily Bangkok-Hong Kong service on the same day.

The airline will next month scale back flights on some routes - Bangkok-Hanoi from twice to once daily, Bangkok-Macao from four to three times per day and Bangkok-Penang from twice to once daily - to correspond to traffic demand.

Indonesia AirAsia launches Jakarta–HCMC flight

21 September 2009

Indonesian budget airline AirAsia inaugurated a direct flight between Jakarta and Ho Chi Minh City on Friday.

It is the first airline to provide a direct flight between the two destinations.

It also marks the first flight for Indonesia AirAsia heading towards Vietnam, after AirAsia Berhad and Thai AirAsia already flying to Hanoi and Ho Chi Minh City; targeting a significant overall average load factor of 75-85 percent.

Indonesia AirAsia said it will have our flights between Jakarta and Ho Chi Minh City every week and expects to post seat occupancy of 70-80 percent in the beginning.


Indonesia AirAsia and Thai AirAsia are affiliates of Malaysia-based AirAsia Berhad, the largest budget airline in Southeast Asia.

AirAsia X preparing a raid on the US air market

21 September 2009

AirAsia X’s publicity stunt in California last week has certainly raised the desired media attention in the US. The airline is sponsoring the Oakland Raiders NFL club and flew an A340 aircraft painted in Raiders livery to Oakland International Airport with airline executives, staff and media on board.

The aim of the sponsorship is to build brand awareness in the US prior to AirAsia X’s launch of services there (no date has been set), so the route is not as reliant on home market traffic. It is a strategy that worked well with AirAsia’s sponsorship of Manchester United football club, which preceded its launch of services to Stansted by four years.

Stansted was selected because of the presence of other European LCCs, which provide opportunities for significant traffic ‘feed’, according to CEO, Asran Osman-Rani, even though no formal relationships exist between the carriers.

In the US, AirAsia X is interested in any airport in southern California (“except Los Angeles International”) and the New York area that can offer quick turnaround times and attractive rates. Azran stated Oakland is of particular interest as it is a major base for Southwest Airlines.

AirAsia X would serve the US West Coast from Kuala Lumpur via Taipei, Incheon or Honolulu and the US east coast via Stansted.

AirAsia’s shares rose 3.6% on Friday. Southwest eased 0.2%.

Selected LCCs daily share price movements (% change): 18-Sep-09

AirAsia spreads its wings to American football

20 September 2009

AIRASIA is fast becoming synonymous with sports.

It has already penetrated the hugely popular English Premier League market, is a partner of the AT&T Williams Formula One racing team and is also the official low-cost airline for Manchester United.

Now, it has spread its wings to American football with its two-year sponsorship of the Oakland Raiders in the National Football League (NFL).

Eye-catching trio: Three cheerleaders posing in front of AirAsia’s Airbus A-340 at the Oakland International Airport on Sept 14.

American football may not be as famous or as popular as soccer in this part of the world but that has not stopped AirAsia Group CEO Tony Fernandes from trying to promote the game here.

“It’s a very popular game in the US and we also want it to be one of the sports in Asia. We (AirAsia), with the help of Oakland Raiders, will make efforts to promote the game in Asia,” Tony told a press conference in Oakland last week.

His made those comments after AirAsia’s “Xcellence’’ – its Airbus A340 – touched down at the Oakland International Airport for the first time last Monday. On board the flight was a group of 10 journalists from Malaysia, Singapore, Thailand and Indonesia.

Also present were newly-appointed Malaysian Ambassador Datuk Seri Dr Jamaludin Jarjis, the city’s Mayor Ron Dellums, Oakland Raiders owner Mark Davis and CEO Amy Trask, AirAsia X CEO Azran Osman-Rani and director Datuk Lim Kian Onn.

“This is a very proud moment for us.

“We are excited to associate ourselves with an iconic team like Oakland Raiders. This partnership will greatly enhance our efforts to boost our brand globally.

“We are already a well known brand in Asia. We are on our way to becoming a household name in Europe.

“And now, our relationship with the Raiders will allow us to establish our brand in the United States,” said Tony.

The no-frills airline’s foray into the NFL is also a way for AirAsia to get landing rights in the US.

AirAsia had, in March, secured landing rights in Stansted, England, for the European tourists.

“We are now in the process of negotiating with airports in the United States on the possibility of operating flights into America,” said Tony.

“American destinations are very much in our long-term plans as demonstrated by our recent order of 10 Airbus A350 aircraft.

These planes will be delivered beginning 2016.

“However, we are exploring ways of commencing flights to the US by the end of next year.”

Tony also said that it would cost an American tourist just US$350 to fly from Oakland to Malaysia.

Once it takes off, Tony expects the NFL and Oakland Raiders’ fan-base to expand in Asia.

Speaking of the Raiders, the 10 journalists, including yours truly, were treated to the season-opening NFL match between Oakland Raiders and San Diego Charges at the Oakland Alameda County Coliseum Stadium on Sept 14.

Unfortunately, the Raiders lost 20-24. Raiders owner Davis was enthusiastic about AirAsia’s sponsorship, saying: “Not only is Xcellence the name of the plane but it is the driving force behind both our organisations to promote the game.”

Corporates on the Net

19 September 2009

LOW-cost budget carrier AirAsia Bhd has pioneered e-commerce and online business when it began operations eight years ago.

Currently 75% of its business transactions are done online. It has an average of 16 million unique visitors a month.

According to an AirAsia spokesman, advertising and promotion (A&P) budget for major campaigns is divided between offline media (70%) and online (30%).

“For smaller campaigns or campaigns targeted at niche markets, we might do the other way around to leverage heavily on online only,” he says.

AirAsia has online ads at Google, Yahoo!, MSN and online portals of publications such as The Star, Sin Chew Daily and Malaysiakini.

“We are mostly targeting the mass market and inform customers about our latest offers. Recently, we launched our “2 days 20% off all flights” banner ads on MSN and The Star Online.

“We gained tremendous increase in click-through rates and linked traffic flow to AirAsia’s website which led to a conversion in sales,” the spokesman says.

He adds that AirAsia aims to build its market share through digital advertising and leverage different dimensions of this medium from brand building to customer engagement, analyse traffic flow for the website and mix both offline and online advertising campaigns.

AirAsia X seeks A330 sale and leaseback deals

17 September 2009

Malaysian long-haul carrier AirAsia X is looking to sell and lease back two of the six new Airbus A330s it will take delivery of by the end of 2010.

Speaking at the Cargo Facts annual Aircraft Symposium in Seattle, AirAsia X CEO Azran Osman Rani says the carrier, which currently operates three A330s and two A340s, has issued a request for proposals for the sale and leaseback covering one of the three A330s it is scheduled to take by year-end. He says the other two aircraft will be financed.

Azran says AirAsia X is also scheduled to take three A330s next year, with deliveries in June, July and November. He says the carrier is looking to pursue a similar combination of two financing deals and one sale and leaseback for these aircraft.

He says AirAsia X will use the three A330s to be delivered the reminder of this year to launch new services from Kuala Lumpur to Abu Dhabi and Chengdu in China plus add capacity on existing routes to China and Australia.

Azran says AirAsia X hopes to use some of the extra capacity being added next year to launch services in Sydney, which would be the carrier's fourth Australian destination after the Gold Coast, Melbourne and Perth. AirAsia X has been trying to secure rights for Sydney for some time and Azran says he now expects this will be achieved in the first half of 2010.

AirAsia X is also evaluating a number of other potential services for 2010, including extending its new Kuala Lumpur-Abu Dhabi route to Europe. Azran says the carrier typically decides on new routes three to four months before an additional aircraft is delivered.

Azran says the carrier may need to raise more capital in 2011 or beyond to support its continued fleet expansion but "right now we're not actively looking at it". According to Flightglobal's ACAS database AirAsia has 23 A330-300s on outstanding order as well as 10 A350-900s.

1Malaysia F1 team will notch up billion ringgit bill

16 September 2009

PETALING JAYA : Malaysia’s foray into the expensive world of Formula One with its 1Malaysia F1 team is expected to cost nothing less than a billion ringgit, industry sources say.

theSun learnt that budgetary concerns pose the biggest challenge in getting the 1Malaysia F1 team off the starting grid in next year’s Formula One race.

The cost of putting an F1 team together from scratch is considerable, with teams spending between US$45.6 million (RM158.7 million) and US$445.6 million (RM1.55 billion) per year on F1 races.

The expenses will involve setting up the infrastructure, where a large portion of the budget will go towards operational expenditures such as employing staff, drivers’ and test driver’s salaries, engines, tyres, fuel, travel, freight, testing, equipment and food. There is also R&D and engine costs to consider.

Malaysia is also planning to build its F1 team headquarters – at a cost of millions or even billions of ringgit – which will be located at the Sepang International Circuit, and comprise an office, R& D facility, technical centre and a wind tunnel.

All parties involved will come together for a meeting after Hari Raya to discuss the financial aspects of running the F1 team.

A public-private partnership company, 1Malaysia F1 Team Sdn Bhd, will work with regulating bodies such as Sepang International Circuit (SIC), Motorsports Association of Malaysia (MAM) and Automobile Association of Malaysia (AAM) on all technical aspects of managing the team.

A spokesman for 1Malaysia F1 Team Sdn Bhd said they will hold a press conference after the festivities to announce the names of the stakeholders, and also the initial budget needed to run the F1 team.

A consortium of other joint venture partners, that include companies such as Proton, AirAsia Bhd and Naza Group, will also be actively involved in the F1 team, but the financial details of their involvement have yet to be determined.

AirAsia’s deputy CEO Datuk Kamarudin Meranum was quoted by AFP as saying that the F1 team is looking for investors.

He, however, declined to reveal how much it will cost Malaysia to participate in the F1 races.

AirAsia’s CEO Datuk Seri Tony Fernandes will be the team’s principal and act as the spokesman for the local team, besides liaising with the International Automobile Federation (FIA).

An official from Naza said the group’s involvement and how much it will spend on the F1 team will be announced in due time.

Yesterday, Prime Minister Datuk Seri Najib Abdul Razak, who is also finance minister, announced the formation of the 1Malaysia Formula 1 Team which, he said, was a government and private sector initiative.

He also said that the team will be based at the SIC and the cars will be designed, manufactured and tested there.

Najib said the funding for the venture will come from the public and private sectors, with the government’s investment being channelled through national car maker Proton.

He stressed that the project would not be a waste of money as it would boost the country’s image internationally and be a marketing platform for Malaysia, Proton, Lotus, AirAsia and Naza.

AirAsia X briefs airports to become a new hub

16 September 2009


Malaysian airline, AirAsia X, launched a best practice session Monday at World Routes in Beijing, providing tips and advice to airports in how best to position themselves to become the next 'hub of choice.'

Malaysian airline, AirAsia X, launched a best practice session Monday at World Routes in Beijing, providing tips and advice to airports in how best to position themselves to become the next 'hub of choice.' [Photo by Wang Zhiyong/China.org.cn]

AirAsia X recently selected Abu Dhabi Airport to be its Middle Eastern regional hub for refuelling and connecting flights to possible destinations in Europe, Africa and central Asia, as part of ambitious expansion plans. The low-cost airline, which is based in Kuala Lumpur, continues to pursue access to new markets through regional hubs that can deliver the necessary requirements to open up completely new markets.

The session, held at the Route Exchange Stand, outlined the potential for a Middle East Airport in attracting a based AirAsia X aircraft to their market.

Paul Winfield, Head of Business Development at Routes, commented: "AirAsia X is a fast growing carrier which can offer practical advice with real commercial benefit to airports. To cultivate a reputation for an airport synonymous with delivering facilities of a leading regional hub is potentially very lucrative for airports. Today’s briefing session was a really accessible means for airports to gain valuable insight into what airlines require from them in the future."

"It's another great example of the diversity of the activities that take place at World Routes!"

AirAsia completes share issues, raises less than expected; JetBlue gain most overall

16 September 2009

AirAsia's shares remained suspended yesterday, as the LCC announced the successful completion of private placement exercise, with gross proceeds from the offering expected to amount to USD144 million, lower than the originally expected USD190 million.

The shares were sold at an issue price of MYR1.33, representing a discount of approximately 6.7% from the five-day volume-weighted average price of AirAsia shares up to and including 14-Sep-09 of MYR1.4257/share. According to AirAsia, the placement has raised the foreign shareholding level in the carrier to 46.1%.

GOL feeling pressure from influx of start-ups, US LCC share prices gain on speculation

GOL's shares slipped 1.2%, upon the release of traffic data that revealed that GOL and TAM are facing increased pressure from start-up carriers in the Brazilian market.

Smaller Brazilian airlines have increased their market share from 8% to 14% over the past year, led by Azul Linhas Aereas Brasileiras, which commenced operations in Dec-2008. TAM and GOL, however, still remain the dominant players, controlling 44% and 41%, respectively, of the domestic market.

US LCC share prices up on speculation of economic rebound

In North America, airline stocks rallied for a ninth day, the longest streak since 1995, following forecasts by JPMorgan Chase & Co and Delta Air Lines that the economic rebound will boost travel spending.

JetBlue's shares had the largest gain yesterday among the US LCCs, up 5.8% yesterday, and have gained 20% in the past month alone.

Selected LCCs daily share price movements (% change): 15-Sep-09

Source: Centre for Asia Pacific Aviation & Yahoo! Finance

AirAsia Falls Most in Six Weeks After Selling Shares

16 September 2009

AirAsia Bhd., Southeast Asia’s biggest discount carrier, fell the most in six weeks in Kuala Lumpur trading after selling shares at a discount in a private placement aimed at cutting debt.

The shares fell as much as 5 percent to 1.34 ringgit and traded at 1.35 ringgit as of 9:57 a.m. local time. It was the biggest intraday drop since Aug. 5.

AirAsia joins other Malaysian companies including Axiata Group Bhd. and Malayan Banking Bhd. in raising funds from stock sales this year amid a rebound in the FTSE Bursa Malaysia KLCI Index. AirAsia, whose shares have surged 55 percent this year, will use the proceeds to reduce its debt-to-equity ratio to 2.5 times from 3.7 times at the end of June, according to RHB Research Institute Sdn.

“With a much better capitalized balance sheet, AirAsia’s insolvency risk is substantially reduced,” Joshua Ng, an RHB analyst, wrote in a report today. RHB maintained an “underperform” rating on the stock “to reflect concerns on AirAsia’s still relatively high net gearing as well as the still tough operating conditions of the airline industry.”

The Sepang, Malaysia-based airline sold 380 million new shares at 1.33 ringgit apiece, raising 505.4 million ringgit, it said in a statement yesterday. The sale price is 5.7 percent lower than the previous close.

Airlines worldwide may lose a combined $11 billion in 2009, $2 billion wider than a previous forecast in June, as fuel costs rise and carriers earn less on fares and cargo, the International Air Transport Association said yesterday.

AirAsia has borrowed money to help pay for purchases after ordering as many as 175 planes from Airbus SAS, making the carrier the biggest customer for the planemaker’s single-aisle aircraft in Asia. The airline is expanding its fleet to add more routes to China and India as economic growth in the region spurs travel demand.

CIMB Investment Bank Bhd. and Credit Suisse (Singapore) Ltd. arranged the private placement, AirAsia said.

Aviation mogul helps puts Malaysia on world sports map

16 September 2009

KUALA LUMPUR: Aviation tycoon Tony Fernandes has added another feather to his cap after helping put Malaysia on the world sports map by steering his country to a place on next year's Formula One grid.

The ebullient 46-year-old is at the forefront of the return to the sport of Lotus, which announced its intention to race once again on Tuesday.

The team is backed by 1Malaysia F1 Team Sdn Bhd, a public-private partnership involving a string of top local entrepreneurs, as well as national automaker Proton.

Its return to fold comes as the sport battles the global financial downturn, which has forced major players like Germany's BMW and Japan's Honda to pull out.

Fernandes, who created Southeast Asia's biggest budget airline, AirAsia, from scratch to become Malaysia's 19th richest man worth $290 million according to Forbes magazine, will be team principal.

It is a high profile role and he joins other luminaries such as fellow airline mogul Vijay Mallya of Force India and flamboyant Renault chief Flavio Briatore.

Kamarudin Meranum, deputy chief executive of AirAsia, which is one of the partners in the 1Malaysia team, said the homegrown Formula One outfit would allow Malaysia to develop new technology and boost its international profile.

"It will help brand Malaysia and spur excellence in sports and education," he said.

"We are excited with this F1 programme. We feel it is good for the country. It will bolster our local auto industry ... The spill-over effect is enormous."

But he insisted that despite Fernandes's dizzying array of business and sporting interests, the new role would not be a stretch for the AirAsia boss.

"It should not be a problem for Tony. He will act as a spokesperson and liaise with the FIA and he can still give directions for his other businesses," he said.

Kamarudin declined to reveal how much it would cost the Malaysian team to compete in the expensive world of Formula One.

"I can't tell you. We are looking for investors," he said.

Fernandes, whose entrepreneurial skills have seen him called the "Richard Branson of Asian air travel", has transformed AirAsia from its origins in 2001 as a tiny two-airline operation.

It now covers more than 130 routes with a fleet of 80 planes, and Fernandes has branched out with a express courier business, a budget hotel chain and telecommunications services.

After graduating from the London School of Economics, he began his career by working as an accountant for Branson's Virgin Records from 1987 to 1989.

This is not his first foray into sports. AirAsia had a two-year sponsorship deal with Manchester United from 2005, and Fernandes is also the chairman of the Southeast Asian Basketball League which he launched in January.

Lotus is making its return to F1 after competing in the event from 1958 through to 1994. Malaysian national carmaker Proton bought a controlling stake in the company in the mid-1990s.

The team will initially be based in Norfolk, England, near the Lotus Cars factory at a facility built by Toyota for its initial Formula One programme and then used by Bentley for its successful Le Mans programme.

But the team's cars will be designed, manufactured and tested at Malaysia's Sepang International Circuit outside the capital Kuala Lumpur, which has hosted a Formula One race since 1999.

Qantas, Air Asia top on-time performance

15 September 2009

NEW DELHI: If you ever wondered why you have to endlessly wait at airports to receive your friend from abroad, here's the answer. Nearly one-third of all incoming flights are late. Departures are only a shade better, with a quarter of all international outbounds delayed. The Directorate General of Civil Aviation (DGCA) has for the first time ever given out the on time performance (OTP) figures of foreign airlines

DGCA chief Nasim Zaidi started the practice of studying foreign airline OTP figures and making them public. “Seventy foreign carriers operate to India. At the time of compilation of this report, on time performance data of 38 carriers was received. Other carriers have been told to furnish the on time performance data in the first week of every month,” said an aviation ministry statement. The overall on time performance of these 38 carriers this August was 74.9% for departures and 66.6% for arrivals.

The government also gave out the names of best and worst on time performance airlines so that passengers can choose the more punctual ones. The airlines with best timing performance on arrival and departure side were — Qantas, Air Asia Berhad, Swiss Air, Air Maldives, Air France and Al Nippon. The “worst” on time performance in both departure and arrival had three common names — Air Yemen, Iran Air and Turkish.

“This was the best way of forcing airlines to improve their ontime performance. We had been asking them for years to shape up on this front but since no one knew how erratic their schedules are, they weren’t worried,” said a senior official.

For instance, a domestic regional carrier had below 30% on time performance in the first survey. The figure was made known to public and now that airline has over 80% on time performance. “Foreign airlines are also going to be closely monitored by us on on time performance and safety fronts. We will begin random checking of aircraft of foreign carriers,” said the official.

To improve on time performance, the ministry allowed 24x7 use of Mumbai’s twin runways and is going to start mix mode use of runways at Delhi. Under this, domestic aircraft will land on the runway closer to domestic terminal. At present, they land at a runway that’s at least 30 minutes taxiing time away from domestic terminal.

AirAsia raises RM505mil from placement

16 September 2009

PETALING JAYA: AirAsia Bhd, which was suspended from trading yesterday, has raised as much as RM505.4mil in a private placement to pare down its debts.

In a filing with Bursa Malaysia, the carrier said it had completed its book-building exercise for the offering of 380 million new AirAsia shares representing 16% of its issued and paid-up capital as at Sept 10.

Based on the record of depositors of the airline as at Sept 10, the foreign shareholding level of AirAsia amounted to 46.10%.

“The private placement was oversubscribed with strong demand from foreign institutional investors.

“The final allocation and the size of the private placement was aimed to achieve a post-placement foreign ownership level of 45%, in line with AirAsia’s articles of association,” it said.

The issue price, which was fixed at RM1.33, represents a discount of 6.71% to the five-day volume weighted average market price of AirAsia shares up to and including Sept 14 of RM1.4257 per AirAsia share.

CIMB Investment Bank Bhd and Credit Suisse (Singapore) Ltd are the joint-placement agents for the exercise.

Earlier, group chief executive officer Datuk Kamarudin Meranun was quoted by Bloomberg as saying AirAsia could offer additional 75 million shares in the private placement.

Chief executive officer Datuk Seri Tony Fernandes, who is currently abroad, could not be reached for comment.

Long-haul sister carrier AirAsia X’s Oakland Raiders aircraft livery made a debut at the Oakland International Airport on Monday. The carrier had earlier signed a sponsorship deal with the National Football League’s Oakland Raiders.

ECM Libra Investment Research, which maintained a “buy” call on AirAsia, said it was “positive” on the private placement, which would help increase liquidity position of AirAsia and lower its net gearing ratio.

“Based on management guidance, post-private placement, net gearing may decrease to 2.5 times from 3.71 times, representing a drop of 32.6%,” it said.

Kenanga Research said the private placement would be a relief for AirAsia’a balance sheet, as it would increase the latter’s cash position in helping to partly fund new aircraft deliveries and some working capital.

AirAsia reports sales boom on London departures

15 September 2009

Kuala Lumpur route enjoys 85% capacity

Low fare airline AirAsia has been flying in the face of the recession by announcing sales of over 75,000 for its London to Kuala Lumpur flight route just six month after its launch.

An announcement from the airline states that the the route from London Stansted had recorded load factors at over 85%, with low-cost long-haul travel proving an overwhelming success with British travellers.

AirAsia X's CEO, Azran Osman-Rani, said: "The surging demand for the London-KL route is testament to the fact that there is a strong appetite for low-cost, long-haul travel despite the tough economic conditions. Many people are realising that they can take their dream holiday to exotic destinations in South East Asia or even take the trip of a lifetime to Australia, for as much as they would usually spend on a holiday Europe - especially considering the strength of the euro at the moment.

"The success of this route, and indeed the other long-haul routes we have launched from Kuala Lumpur recently, including Abu Dhabi in the Middle East and Chengdu in China, prove that the long-haul low-cost model can work effectively. Our model hinges on the extensive multi-hub route network and means that we are able to offer the same connectivity as a normal legacy network carrier, but without the cost and complications of running a traditional hub."

AirAsia X has recently advertised flights between London and Kuala Lumpur at prices ranging from £149-£199, a factor fundamental to the success of the route.

AirAsia new shares likely priced from RM1.33 to RM1.40

15 September 2009

PETALING JAYA: Trading in AirAsia Bhd shares is suspended today pending an announcement on the results of the bookbuilding exercise, including the price for the new shares arising from its private placement programme.

In a filing with Bursa Malaysia, the low-fare airline said the suspension would be until 12.30pm.

Last week, shareholders approved the private placement proposal, which would allow AirAsia to strengthen its balance sheet and increase financing flexibility while reducing its net gearing.

Passengers boarding an AirAsia aircraft at KLIA. AirAsia’s private placement will allow the carrier to strengthen its balance sheet

The exercise will involve up to 481.1 million new shares, or 20% of the airline’s issued and paid-up capital, with the offer price not more than 10% discount to the five-day weighted average market price prior to the price fixing date.

It was reported earlier that AirAsia aimed to raise about RM500mil and had approached foreign investors in Singapore, Hong Kong and London.

Chief executive officer Datuk Seri Tony Fernandes could not be reached for comment.

Quoting a deal term sheet, Reuters yesterday reported that AirAsia was expected to raise up to RM560mil by selling 400 million shares via a private placement and had set an indicative price range of RM1.33 to RM1.40 a share for the sale.

CIMB Group and Credit Suisse are the joint placement agents for the exercise.

OSK Investment Bank analyst Ng Sem Guan noted that the airline’s share price “was holding quite well” in the last couple of days ahead of the announcement”.

“AirAsia could be attracting foreign investors who do not own the shares currently,” he said.

He added that the proceeds from the private placement would significantly reduce the company’s gearing level although it would dilute the shareholding of major shareholders.

Meanwhile, Kenanga Research estimated AirAsia’s earnings per share would be diluted by 17% while net gearing would be reduced to 2.3 times from 3.2 times currently.

“The proceeds raised will be earmarked for partial debt settlement and as working capital,” it said in a report.

It noted that the management had yet to hedge fuel cost as prices were relatively stable.

The research house has revised upwards its earnings forecast for the airline for years ending Dec 31, 2009 and 2010.

This is in anticipation of lower finance cost and higher ancillary income.

The stock was last traded at RM1.41 per share.

Jet wears Raiders branding

14 September 2009

OAKLAND — Between the hash marks, the Oakland Raiders have their work cut out.

As a brand name, they're already king.

On Monday, this was exemplified when AirAsia touched down at Oakland International Airport on a plane named Xcellence, complete with Raider colors. Trying to match the teams motto "Commitment to Excellence," the Airbus A340 was branded almost entirely in silver and black. On one side were three Raiderettes, and on the others three unidentifiable players. The Raider Shield was on the tail.

"Internationally everybody knows about the Raiders, and we have a huge global presence" said Raider executive Mark Davis, son of owner Al Davis. "So to do this made a lot of sense."

This was the first time Air-Asia, the sixth largest carrier out of Asia, has been into U.S. territory. However, for fans who can't wait to fly on this plane and express team loyalty, there's a hitch. It could be years before AirAsia is in the United States again.

This was a special flight filled with AirAsia executives and flight attendants to announce the partnership.

For actual passengers, this single plane out of its 80-plane fleet will have to be boarded in Kuala Lumpur, Malaysia. But by 2016 that could change.

"Undoubtedly when we picked the Raiders as the team we would feature, we obviously had Oakland on our mind," said Tony Fernandes, chief executive of AirAsia Group. "Because this airport has lots of low-cost carriers, in our mind it's a logical step to come here."

Oakland airport officials say they'd welcome AirAsia as quickly as possible.

"We can absolutely support this whenever they are interested in serving this market," said Rosemary Barnes, airport spokeswoman. "Hopefully this is the start of building a good relationship."

AirAsia X is the long-haul carrier affiliate of AirAsia.

The business strategy for AirAsia is to brand themselves in a market before it enters. For example, before it entered the market in England, it branded another plane similarly with the popular soccer team Manchester United.

"It's a very left-of-center thing to sponsor an NFL team, but this will help us establish our brand in the United States quickly once we decide to come here," Fernandes said.

One reason the Raiders were picked is that it's one of the only NFL teams that translates its site into numerous Asian languages, including Chinese, Japanese and Tagalog.

The sponsorship deal was pulled together quickly, as the sides first sat down on the idea after the Super Bowl.

"Who knows how this business relationship will work, but they're a forward-thinking company which we like," Davis said "We want to see where this goes."

Fernandes said he would love to one day see the Raiders play an exhibition game in Malaysia.

"Already the Raider brand is well known in Malaysia," Fernandes said. "But there's nothing that would be better than being able to see the live product."