KUALA LUMPUR: AirAsia X Sdn Bhd is planning to go public as early as the second half of the year, despite axing four of its more popular routes.
CEO Azran Osman-Rani said the listing of the long-haul low-cost carrier is subject to the listing of AirAsia’s foreign associates — Thailand AirAsia and Indonesia AirAsia.
“As you know, the Thailand and Indonesian IPOs will take off first. Only then AirAsia X. So I would like to think that AirAsia X’s listing can happen in the second half,” he told The Edge Financial Daily in a recent interview.
The intention to list AirAsia X is not new. The carrier first unveiled plans to list its shares to raise funds for expansion more than two years ago.
It was reported in the past that the exercise, which was put on hold due to unfavourable market conditions, would raise as much as RM1 billion for the long-haul budget airline.
But with recent developments signalling decelerating growth at the airline, there are questions about its plans for an IPO.
AirAsia X recently postponed plans for a US$200 million (RM600 million) Islamic bond issue planned for March by at least 12 months. The proceeds from the sukuk issuance were originally for the purchase of two planes flying the London and Paris routes -- from which AirAsia X withdrew earlier this year. The airline has also axed the Kuala Lumpur to Mumbai and New Delhi routes.
“We are not cancelling the sukuk issue. We are putting it on hold since we are not getting any delivery of planes this year, but only in 2013,” said Azran.
The airline needed to withdraw from the four routes because they were unprofitable. The airline was “bleeding millions a month” on the London route, he said, which is dominated by full-service carriers, especially those from the Middle East.
“It is difficult to compete with full-service carriers that offer better service at a price just marginally above ours. Emirates also recently added A380 services on this route,” he said.
The Delhi route has been unprofitable for more than one year following the visa revocation of Indian workers. He said there was also a 700% increase in airport taxes at Delhi.
On the Mumbai route, Azran said the plane was redeployed to serve Haneda, Tokyo.
He said despite the axing of the four routes, the airline -- which has nine aircraft and flies to 15 different countries -- still has a good IPO story to tell investors.
“Our China and other routes are profitable. And now we have Sydney. We still have a good IPO story,” he said.
However, one potential caveat for AirAsia X’s IPO plan is its losses for FY11 ended Dec 31.
“I can’t share with you the figures as they are being finalised,” said Azran, who attributed the losses to the now axed London, Paris, Mumbai and Delhi routes.
It is not known what kind of valuation AirAsia X can demand for its IPO, but if the listing of Singapore’s Tiger Airways is taken as a benchmark, the former can fetch a price multiple in the low teens, analysts said.
After all, the Singapore Airlines low-cost unit was still making losses when it went public last year.
AirAsia X has been in the limelight recently for all the wrong reasons, which include the recent lawsuit filed by an Australian consumer watchdog against the airline.
The watchdog claimed some fares sold on the airline’s website did not display prices inclusive of all taxes, duties, fees and other charges.
However, in its latest statement AirAsia said it has taken “corrective action” to resolve the issue, which the airline attributed to an “IT glitch”.
Azran said the lawsuit has not impacted its ticket sales for its recently introduced Sydney route.
It is worth noting that although AirAsia X has been fighting for the coveted route for the past three years, it was only awarded the rights recently.
This came a few months after Malaysian Airline System Bhd (MAS), AirAsia Bhd and Air Asia X signed a comprehensive collaborative framework agreement (CCF).
MAS, on the other hand, has also withdrawn from unprofitable routes, which include Dubai and Johannesburg.
Given the chronology of events, both AirAsia (including its unit AirAsia X) and MAS were put under public scrutiny for the deliberate “give and take” of the routes they fly, which can be viewed as anti-competitive behaviour.
Azran said AirAsia X has its ground covered if it were to be taken to task for anti-competitive behaviour as it has valid reasons behind the rationalisation of its routes.
“We considered axing these routes way before the CCF with MAS last August,” he said.
As for AirAsia X managing to secure the Sydney route, Azran said, “The launching of Scoot was one of the major reasons why AirAsia X could secure the route this time around.”
Late last year, Singapore’s new long-haul no-frills carrier Scoot, which is said to be a major rival to AirAsia X and even Australia’s Qantas, chose Sydney as its first city to fly into in mid-2011.
Under the CCF, Khazanah Nasional Bhd was also given the option to take up to 10% in AirAsia X.
“Khazanah has bigger issues to iron out with regards to the CCF before they embark on this decision [to exercise the option in AirAsia X],” responded Azran when asked about developments on the matter.
This article appeared in The Edge Financial Daily, February 9, 2012.
