AirAsia raising $257m in share sale

AirAsia raising $257m in share sale

KUALA LUMPUR — AirAsia is raising 1 billion ringgit (US$257 million) by selling shares to a company controlled by its founders as the continent’s biggest budget airline raises cash to finance aircraft purchases and pare down debt.

The airline will issue 559 million new shares at 1.84 ringgit each to Tune Live Sdn, equally owned by CEOTony Fernandes and chairman Kamarudin Meranun, AirAsia said in a statement to the Kuala Lumpur stock exchange on Friday. The sale represents 16.7% of the enlarged capital of the Malaysia-based carrier.

Fernandes and Kamarudin control another company, Tune Air Sdn, which is the largest shareholder of the airline at 18.9%. That holding company’s stake in AirAsia will decline to 15.7% after the new share sale.

AirAsia is the second-best performing stock on the MSCI Asia Pacific Index this year amid speculation that its key shareholders could step in to strengthen its finances or take the company private.

Mounting competition from Malaysia Airlines and other low-cost carriers has led to a drop in ticket prices in the region and the carrier’s share price dropped to its lowest in August last year.

Southeast Asian airlines, particularly budget carriers, have suffered from a price war as they jostle for market share. Short-haul yields at carriers in the region will continue to be squeezed this year as airlines add capacity, Bloomberg Intelligence said last month.

Fernandes, 51, assumed 40 million ringgit of debt when he bought AirAsia for one ringgit in December 2001, according to the airline’s website. The carrier had two old aircraft when Fernandes took charge. Prior to running AirAsia, Fernandes was an employee at Richard Branson’s Virgin Group.

The budget carrier now has more than 100 planes with operations spanning India, the Philippines, Indonesia and Thailand. The company, which plans to start flights at its Japan venture this year, is one of the world's biggest customers for Airbus narrow-body aircraft.

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