May 29 (Bloomberg) -- AirAsia Bhd., Southeast Asia’s largest low-cost airline, said it’s considering raising about 500 million ringgit ($143 million) to fund expansion in the Malaysian company’s biggest share sale since listing in 2004.
“We’re looking at it,” Chief Executive Officer Tony Fernandes said in an interview today. “If our growth requires us to raise more cash, then we’re not averse to it.”
AirAsia, which has ordered 175 Airbus SAS planes, may raise the money in a stock sale or a rights offer to shareholders, Fernandes said. The timing or the structure of the transaction hasn’t been decided, he said.
The airline’s shares have surged 50 percent this year in Kuala Lumpur trading, providing currency to raise funds as debt markets wither in the financial crisis. Fernandes expects Airbus to deliver about 24 planes annually for the next three to four years as the airline adds routes to India and boosts flights to China.
“Raising debt would be much cheaper, but I don’t think companies have a lot of choice these days,” said Raymond Yap, an analyst at CIMB Investment Bank Bhd. in Kuala Lumpur with an “outperform” rating on AirAsia. Yap issued a report earlier today saying AirAsia may be considering a rights issue.
The carrier had a fleet of 74 planes at the end of March 31, it said in a statement yesterday after reporting its highest quarterly profit since the final three months of 2007. AirAsia had 59 Airbus A320 aircraft and 15 Boeing Co. 737s.
Based on AirAsia’s profit-growth forecasts, a 500 million- ringgit share sale won’t necessarily dilute earnings, Fernandes said. The Sepang, Malaysia-based company had 224 million ringgit of cash on its books at the end of March 31.
Stock Gains
AirAsia today rose 4 percent to 1.30 ringgit at the 5 p.m. close on the local stock exchange, the highest close in more than a year. Malaysia’s benchmark Composite Index added 0.3 percent.
AirAsia’s second-quarter passenger traffic is headed for a 21 percent jump, matching last quarter’s increase as budget- conscious travelers look for cheaper air fares, Fernandes said.
“For the moment, things are rosy,” he said in a Bloomberg Television interview. The “second-quarter demand looks good.”
Profit at the airline climbed 26 percent in the first quarter to 203.2 million ringgit after the company flew more passengers and added new routes, the company said yesterday after the stock market closed.
The carrier’s surging traffic contrasts with slumps at regional rivals including Singapore Airlines Ltd., which is cutting routes and capacity. AirAsia, which expects to fly 24 million people this year, is increasing its capacity by about 20 percent each quarter, the chief executive said.
AirAsia, which currently flies to one destination in India, will fly to at least six more airports in the South Asian nation before the end of 2009, Fernandes said.
To contact the reporter on this story: Angus Whitley at awhitley1@bloomberg.net
Last Updated: May 29, 2009 05:13 EDT
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