Air Asia unit in PH eyes IPO in 2017

Kuala Lumpur—Philippines Air Asia could accelerate plans for its initial public offering (IPO) given improving business prospects, Malaysian tycoon Tony Fernandes said last Friday.

Fernandes, group CEO of budget airline giant Air Asia Berhad, told visiting Filipino journalists that the IPO of its domestic affiliate, originally seen in 2018, could be held next year.

“I’m going to do it next year, we’re going to try,” Fernandes said.

Philippines Air Asia originally planned to raise about $200 million via an equity offering, but Fernandes said it was possible to raise “maybe more” than that figure.

While declining to elaborate, he said proceeds from the offer would be used for aircraft acquisition and general expenses. Philippines Air Asia, which still relies on Air Asia Bhd for financial support, has a fleet of 15 Airbus A320s, which it uses for domestic and regional routes.

“You have almost 100 million population, but a very small tourism market,” Fernandes said as the carrier sealed a
10-year agreement with Air France Industries KLM Engineering and Maintenance (AFI KLM E&M) for its fleet of A320neo planes.

“It should be much bigger, it can be very big,” he said. “I’m a big believer in the Philippines.”

Philippines Air Asia, with a market share of about 10 percent in the country, mainly competes here against Philippine Airlines and Cebu Pacific Air, also a budget airline. Air Asia is a much larger player in the region.

“The only drawback is infrastructure, the airport. But it appears there has been some positive news made by the present administration,” Fernandes said.

AirAsia has a fleet of more than 200 Airbus aircraft. It has further orders for 300 A320neos and 100 A321neos. Also on order are longer range A330neos and next-generation A350s. Apart from the Philippines, the Malaysian carrier has affiliates in Japan, Thailand, India and Indonesia.

The accelerated IPO plans come as the carrier eyes full-year profitability by 2017.

“We will take PAA (Philippines Air Asia) into the black by end-2017 on double-digit topline growth and a lower cost base from a more efficient fleet and keeping staff costs to below 10 percent of revenue,” Fernandes said in the company’s latest report disclosed to the Malaysian Stock Exchange.

Philippines Air Asia reported a net operating loss of P914.8 million, lower by 2 percent while net loss after tax narrowed 12 percent to P1.2 billion for the third quarter of 2016.

The airline continued to grow, with revenues up 24 percent to P2.57 billion. Philippines Air Asia said this was due to an 8-percent increase in passenger volume and as average fares rose 21 percent to P2,245.

Philippines Air Asia was also planning to increase ancillary revenues, which refer to non-ticket sales like baggage fees and onboard meals, to “above” P500 per passenger, its filing showed.

AirAsia Bhd.’s network spans more than 120 destinations across Asia, Australia and New Zealand, the Middle East and Africa.