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AirAsia X To Raise Up To US$370m In IPO To Fund Growth
Perspective | 14 June 2013

AirAsia X, the long-haul arm of Asia’s biggest budget carrier, plans to raise up to US$370 million through an initial public offering (IPO) in Malaysia to fund its expansion amid a surge in travel demand.

Institutional investors can bid for the Sepang, Malaysia-based airline’s stock at a range of RM1.15 to RM1.45 apiece, according to the term sheet obtained by Bloomberg News. The carrier can raise up to US$426 million if it exercises its greenshoe option. The price for individual investors was set at RM1.45, according to the prospectus filed in the Star newspaper on 10 June.

Proceeds from the IPO will help repay bank borrowings and set up new hubs, said the affiliate of AirAsia, the region’s biggest low-fare airline. Chief executive officer Azran Osman-Rani wants to expand to fend off competition from Singapore Airlines’ long-distance budget unit Scoot that started flying last year. Economic growth across Asia has spurred travel, prompting at least 15 budget-airlines to start operations in the past decade.

“We have an early mover advantage in the low-cost, long-haul segment globally, which is poised for substantial growth in coming years,” AirAsia X said in its prospectus. “We believe we have the lowest unit operating cost base of any airline in the world.”

The airline is offering 10.6 percent of its share capital to individual investors and 14.4 percent to institutions, according to the prospectus. The final sale price for individuals may change if the institutional price is lower, it said.

Travel Demand
This is the second of the three proposed listings by affiliates of AirAsia as the group raises funds to accelerate expansion. In December, the airline ordered 100 Airbus A320s valued at US$9.4 billion, in addition to the 200 it had agreed in 2011 to purchase. The carrier is also adding a unit in India through a venture with Tata Group.

Budget carriers’ market share in the Asia-Pacific region rose to 24 percent last year from 1.1 percent in 2001, according to the CAPA Centre for Aviation, an industry consultancy.

Total traffic for the region will expand 6.4 percent a year during the next 20 years, according to jet maker Boeing Co. In that period, almost half of the world’s air traffic growth will be driven by travel to, from or within the Asia-Pacific, it said.

Asia-Pacific overtook North America as the world’s biggest aviation market in 2009, according to IATA. The region’s passenger growth, both domestic and international, is expected to add about 380 million travelers between 2012 and 2016 to 1.2 billion, IATA forecast in December.

CIMB Group Holdings, Malayan Banking, Credit Suisse Group and Morgan Stanley are joint global coordinators for the offering. Barclays, BNP Paribas, Citigroup, CLSA and HSBC Holdings are helping manage the offering.

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