KUALA LUMPUR, 16 July 2003 — Malaysia’s no-frills airline, AirAsia, expects to offer its first Islamic bond issue later this year to help finance the purchase and lease of 11 Boeing 737-300 aircraft, the company said yesterday.
“The issuing of Islamic bonds is progressing well. We are happy with the progress. The debt market is showing lots of confidence in AirAsia,” Chief Executive Tony Fernandes told reporters.
The company aims to offer 160 million ringgit ($42 million) in seven-year Islamic bonds by September or October.
Earlier yesterday, Fernandes launched the company’s multilingual website, which allows customers to book online.
Over 45 percent of AirAsia’s total sales are generated over the Internet. In the last 14 months since AirAsia introduced online booking, it has recorded sales of over 60 million ringgit through that source alone.
Kamarudin Meranun, AirAsia’s executive director, told AFP the carrier was hopeful the bonds could be issued by September or October and was aiming for a seven-year issue at the lowest yield. “At the moment, the lowest yield is about four percent,” he said, adding: “We hope to get a favorable rating that reflects truly the underlying value of the company.”
Kamarudin said numerous groups had expressed interest in the bond, including foreign institutions. “We have a lot of interested parties,” he said.
Asked about the immediate passenger volume outlook for AirAsia, he said: “The growth in passenger numbers is going to be exponential.” “We have placed fixed orders for 11 aircraft. We are buying four aircraft and will lease seven. By the end of 2004, AirAsia will have 18 aircraft.” AirAsia has flown two million passengers within 18 months of operation. It currently has seven aircraft.
The fleet expansion is needed to serve new destinations, including southern Johor state, which neighbors Singapore, and the oil town of Bintulu on Borneo island.
Critics initially predicted AirAsia would fail within three months of launching domestic flights in December 2001. But it has since been praised as a “vibrant and profitable low-cost airline”.
Kamarudin said AirAsia’s three new foreign partners had already injected $26 million into the carrier. “We have secured the funds. We will use them as a buffer to purchase the new aircraft if the bond issue is delayed,” he said.
The investors are the Islamic Development Bank, Gulf-linked Crescent Venture Partners and Deucalion Capital, a Frankfurt-based global private equity fund. Fernandes reiterated AirAsia’s belief that it was unwise to rush into flying regional destinations. “We will go when the time is right. At that stage, we will go regional,” he said.
AirAsia had previously indicated that it would like to fly to Singapore, Thailand and neighboring Indonesia.
Adding to the list, Fernandes said the southern coastal states of India, including Kerala, could also be one of the carrier’s potential regional destinations, taking into account the close ties between Malaysia’s Indian population and India.