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Air Asia X seeks fresh capital to fund expansion


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#1 flee

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Posted 04 August 2009 - 10:28 AM

SEPANG: AirAsia Bhd, which is looking to raise about RM500mil from the private placement of 20% of its share capital, is targeting RM1bil cash reserves by year-end.

Group chief executive officer Datuk Seri Tony Fernandes said the RM1bil cash to be raised might or might not include the RM500mil from private placement, which the board approved yesterday.

“The RM1bil cash reserves will be achieved from various activities that include improving efficiency, increasing seat load factor and other expenses wherever possible,” he told a media briefing after the company’s AGM and EGM yesterday.

Fernandes said the fund raised from the private placement would be used mainly to reduce the airline’s gearing and help restructure its finances.

An analyst with TA Securities said post-private placement, AirAsia’s gearing ratio was expected to fall to 2.7 times from 3.7 times now, which is a key concern among investors on the stock.

On the airline’s fuel-hedging strategy, Fernandes said: “AirAsia is currently on spot fuel buying, which is now proven to be the right decision, and we’ve managed to unwind our fuel derivative contracts.”

On why the board did not equity-account the airline’s share of losses in Thai AirAsia Co Ltd (IAA), Fernandes said it was the advise given by auditor PricewaterhouseCoopers.

AirAsia deputy group chief executive officer Datuk Kamarudin Meranun said the company had wanted to equity account the losses of IAA into its books.

“But we were advised not to do so by our auditors as there were still some outstanding issues then relating to IAA’s former stakeholders Shin Corp and later Temasek Holdings,” he said.

On AirAsia eating into Malaysian Airlines’ market share, Fernandes refuted the claim. “We have not done so. In fact, we have opened up new routes to allow more people to fly at budget fares never done by any other airlines.”

On the dispute with Malaysia Airports Holdings Bhd over various outstanding charges, Fernandes said: “We are hopeful that the issue will be resolved in two weeks.”

Asked about AirAsia’s performance going forward, he said: “We expect to be profitable this financial year, which goes to say a lot for us, when most other airline companies are making losses in these challenging times.”

He also said AirAsia’s second-quarter results (which are soon to be announced) should be reasonable.

The budget airline recorded a net profit of RM203.15mil in the first quarter ended March 31, up 26% from RM161.28mil in the previous corresponding period.

Source: http://biz.thestar.c...19&sec=business

#2 Azreen

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Posted 04 August 2009 - 02:30 PM

I wonder how much cash is generated from the operations?

#3 flee

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Posted 04 August 2009 - 04:53 PM

Accountants will tell us that cash reserve and profits are two different things. AirAsia pays a great deal of attention to cash management cos if this is done well, profits will look after itself.

AirAsia has forward bookings that go to April 2010 - all these fares are 100% paid. So there should be plenty of cash generated from operations. However, we do wonder how well they are managing their cash from operations. That was why Tony Fernandes recruited (from online sources) 5 people for their Ancilliary Income department - this is the department that looks after cash from non core activities, I guess.

#4 ksauyong

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Posted 04 August 2009 - 05:53 PM

Someone wrote in an online newspaper

"What a moron. Every other firm is using renouncable rights issuance for their fund raising, ensuring that the principle of ensuring their long term shareholders are given priority in subscribing to new share issuance is upheld.
Tony on the other hand is happy to hand shares at a discount to new shareholders, leaving current shareholders with diluted stakes. Perhaps he is so broke, he can't subscribe to his own portion, hence the offer to external parties.
AirAsia's long term shareholders should perhaps start a sell off, resulting in a price collapse, ensuring his new share issuance is a 'spectacular success'".

sounds about right.

#5 flee

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Posted 04 August 2009 - 08:05 PM

I think the source is here: http://malaysianinsi...bt-with-funding

Anyway, I suspect that Tony does not want the hassle of a public offering due to the pathetic understanding of the AK LCC model by local analysts. This caused a write down on their share price last year, due to their incorrect reading on the fuel hedging issue. AK was then forced to hedge fuel to please these analysts. That resulted in huge losses in Q4 as fuel prices tumbled. The analysts are a big business risk for AK!

I think they would have secured the agreement of the big shareholders for this excercise - probably already offered the placement to them for first refusal. If they did not, then they would be morons. For Bursa shareholders, I am not sure if any of them are big enough to have their voting rights diluted.

#6 Naim

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Posted 19 August 2009 - 10:28 PM

Thomson Reuters
UPDATE 1-Air Asia X seeks fresh capital to fund expansion

08.19.09, 09:16 AM EDT
By Stanley Carvalho

ABU DHABI, Aug 19 (Reuters) - Low-cost Malaysian carrier AirAsia's long-haul unit is in talks with Middle Eastern investors, its chief executive said, as it seeks fresh capital to help fund a potential expansion into Europe and Africa.

Air Asia X CEO Azran Osman-Rani said the Malaysian carrier needs 'a stronger equity base after 2010', as it launched direct flights from Kuala Lumpur to Abu Dhabi.

'There has been interest from investors in the Middle East, including institutional investors and sovereign wealth funds,' he said.

He declined to specify who the carrier was in talks with, adding that the size of any stake sold 'will be decided next year and (depends) on the appetite of investors'.

Bahrain-based Manara Consortium took a 10-percent stake in Air Asia X last year.

Launched in 2007, Air Asia X currently flies to eight destinations including China, Australia and the United Kingdom from its Kuala Lumpur base.

The airline has a fleet of five aircraft -- A330s and 340s -- and plans to take delivery of three more A330s before the end of 2009, he said.

It also plans to increase the frequency of Abu Dhabi flights to five a week in November and make the United Arab Emirates capital a regional hub.

It aims to expand to other Mideast destinations and into mainland Europe and north and east Africa after that.

SPAIN AND SCANDINAVIA

'Spain, Scandinavia and east or north African cities are interesting markets. There are lots of proposals, we will choose markets that are unexploited, under-served,' he said.

Abu Dhabi is the airline's first destination in the Middle East and it is eyeing Jeddah as its next spot to capitalize on travellers heading to Saudi Arabia for pilgrimages, Osman-Rani said.

Air Asia X had an average passenger load factor of 75 percent in the first six months of this year, Osman-Rani said, projecting an increase in revenues this year despite low fares.

'Forward loads are stronger,' he said. 'Ours is a volumes strategy. Margins are thin but we have very low unit costs - 2.4 US cents per seat kilometre, January to June including fuel.'

The airline did not hedge its fuel costs for this year but will take positions in 2010 and 2011.

(Reporting by Stanley ( SXE - news - people ) Carvalho; editing by John Stonestreet) Keywords: AIRASIA CEO/

(dubai.newsroom@.com; +971 4 391 8301)

http://www.forbes.co...afx6793737.html

#7 Mohd Azizul Ramli

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Posted 19 August 2009 - 10:39 PM

Abu Dhabi is the airline's first destination in the Middle East and it is eyeing Jeddah as its next spot to capitalize on travellers heading to Saudi Arabia for pilgrimages, Osman-Rani said.

OMG, D7 is coming to JED!

#8 Mushrif A

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Posted 19 August 2009 - 11:13 PM

It will interesting to see the reaction on the ground if the Raiders A340 substitutes an A330 to do the JED route .....Pornography Billboard-size!!!

#9 Mohd Azizul Ramli

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Posted 19 August 2009 - 11:28 PM

LOL, very true! Here actually, even posters pasted at the wall of a shop in malls or souks, if it is featuring a woman, the face will be somewhat 'photoshopped' (blurred face/blackened eyes etc). If 'she' is not in 'proper' clothing, 'she' will be given the 'free abaya treatment' using a black marker pen. 'She' has to wear an abaya!

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#10 Mushrif A

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Posted 20 August 2009 - 07:29 AM

Maybe if operational exigency means the Raiders A340 will have to do the JED run, then maybe D7 better keep some Abaya "stickers" ready. Would be interesting to see how those 3 girls look in Abaya stickers. Anybody care to do a photoshop as an illustration?

#11 flee

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Posted 20 August 2009 - 11:17 AM

Apparently, the A343 was deployed because it had better seats. They will revert to the A333 when it has better seats than those non reclining ones...

I think the livery should not be a problem. The UAE are very fair and tolerant and understand business requirements and work with businesses to make things smooth - not the same as the arrogant and high handed authorities in Malaysia.

#12 Mushrif A

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Posted 20 August 2009 - 11:51 AM

I think the livery should not be a problem. The UAE are very fair and tolerant and understand business requirements and work with businesses to make things smooth - not the same as the arrogant and high handed authorities in Malaysia.


We were talking about JED = Jeddah of KSA, not UAE nor M'sia.

(And AK website seems to suggest, at least in terms of layout of the text, that Jeddah is now part of the UAE.)

#13 flee

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Posted 20 August 2009 - 11:53 AM

We were talking about JED = Jeddah of KSA, not UAE nor M'sia.

(And AK website seems to suggest, at least in terms of layout of the text, that Jeddah is now part of the UAE.)

D7 is not going to Jeddah as yet and I suspect that A333s will be used when they do.

#14 Mushrif A

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Posted 20 August 2009 - 12:07 PM

D7 is not going to Jeddah as yet and I suspect that A333s will be used when they do.


Yes, yes...we all know that, but in post #1 and #2, it is clear that Jeddah is possibly next after AUH. And we specualted what would happen if operational exigency required the use of the Raiders 340 to do the JED route.

#15 Naim

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Posted 20 August 2009 - 12:09 PM

Yes, yes...we all know that, but in post #1 and #2, it is clear that Jeddah is possibly next after AUH. And we specualted what would happen if operational exigency required the use of the Raiders 340 to do the JED route.


Hehehe ... maybe Kenneth has a solution, his plane maaaa ... :D

#16 flee

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Posted 20 August 2009 - 12:18 PM

Yes, yes...we all know that, but in post #1 and #2, it is clear that Jeddah is possibly next after AUH. And we specualted what would happen if operational exigency required the use of the Raiders 340 to do the JED route.

Well lets see what happens - but by the time they make it to Jeddah, they will have another 3 more A333s. Besides, the RAIDERS sponsorship is not going to last forever! The Man Utd logojet lasted only 3 years, if I remember correctly.

Edited by flee, 20 August 2009 - 12:18 PM.


#17 Mushrif A

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Posted 20 August 2009 - 12:34 PM

Never say it will be a long time before it happens. AUH is ONLY happening because Seoul and Sydney got blocked, and plans were switched/ accelerated. Otherwise, thumbs twiddling.

Hehehe ... maybe Kenneth has a solution, his plane maaaa ... :D


X-cellence into X-posed, X-rated

#18 Naim

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Posted 20 August 2009 - 12:41 PM

Never say it will be a long time before it happens. AUH is ONLY happening because Seoul and Sydney got blocked, and plans were switched/ accelerated. Otherwise, thumbs twiddling.


Part of Plan B, I reckon, so too Spain, Scandinavia and Africa. Very fluid situation, can happen anytime.

#19 Izhar Z

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Posted 20 August 2009 - 02:00 PM

Spain and Scandinavia sounds interesting. I'd rather they go there than seoul or sydney. But thats just me. Hehe.....

#20 Naim

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Posted 20 August 2009 - 02:08 PM

Spain and Scandinavia sounds interesting. I'd rather they go there than seoul or sydney. But thats just me. Hehe.....


I won't argue with that! :D




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