Budget carrier AirAsia X plans a $300 million IPO as Asia Pacific emerges as the world’s biggest air travel market

AirAsia X prepares for take-off.
AirAsia X prepares for take-off.
Image: AP Photo/Vincent Thian
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Malaysian budget airline AirAsia X, the long-haul arm of parent company AirAsia, plans to raise $300 million in an IPO on the Malaysian exchange to fund expansion of its routes throughout Asia and pay off debt. The company had scrapped plans to list in the first quarter of this year, postponing those due to the upcoming Malaysian elections and to global volatility. The IPO is scheduled for July 10; the Malaysian exchange is now trading at an all-time high.

The Asia-Pacific region is the fastest growing market for air travel in the world, according to International Air Transport Association (paywall). Passenger traffic in Asia Pacific is now more than twice what it was in 1998, and the region now stands shoulder-to-shoulder with North America.

Low-cost carriers throughout southeast Asia have been snapping up Airbus planes as they geared up for new routes. AirAsia X joins Indonesia AirAsia, its sister company, Malaysian Airline System Bhd and Thailand’s Nok Airlines and Bangkok Airlines in announcing plans to list publicly this year. Lion Air, Indonesia’s biggest domestic carrier, is planning a 2015 IPO.

Established in 2007 by Malaysian entrepreneur Tony Fernandes, AirAsia X has built out a route plan focused on serving low-cost airports. It has been ramping up its long-haul flights by expanding to Australia, China, the Middle East and Europe. Its northeast Asia routes now put it slightly ahead of competitors in the race to serve the region’s booming demand.

Around 44% of its IPO proceeds will go to paying off debt, while 22% will be set aside for capital expenditures for planes already on order, among other things. AirAsia X currently flies to 13 destinations in Japan, South Korea, Taiwan, China, Australia and to Jeddah in the Middle East. It’s looking to expand that even further, as well as to set up a second base in Thailand, as Reuters reports.

AirAsia X says it has the “lowest unit cost base of any airline in the world,” allowing it to sell fares at 30-50% of those offered by other full-service carriers, according to its IPO prospectus (pdf, p.1). It says it also has the largest wide-body aircraft fleet by seat capacity of any low-cost carrier in the region.