AirAsia seeks private equity boost
KUALA LUMPUR: Budget airline AirAsia is planning to sell a significant stake in its new long-haul business to private equity investors as the airline prepares to fly to the UK, China and Australia.
Tony Fernandes, chief executive of AirAsia, told Guardian Unlimited that budget flights from Kuala Lumpur to Britain could take off from March next year, priced at between £130 and £200 for a return trip.
“We have enough capital to last us but if there is cash available we should take it,” said Fernandes, who added that “a lot of people from the private equity community have made approaches for 20% to 30% of the business”.
The AirAsia boss declined to name the suitors, but the company has appointed investment bank Credit Suisse to broker the deal.
Having leased a single 380-seat Airbus A330-300 aircraft, AirAsia will launch its inaugural long-haul service from its Kuala Lumpur base in September, with Australia or China the likely destination: “I don’t want to go too far with only one plane,” said the AirAsia boss.
UK flights are scheduled to start in March or April once the company has leased a second aircraft. London Stansted – “the low-cost capital” according to AirAsia – is expected to win a contest with Manchester airport to be the UK destination.
The return flights will cost between £130 and £200, with food and in-flight entertainment costing extra. With about 380 seats, AirAsia expects to break even if the plane is 56% full, said Fernandes. The venture is backed by an initial investment of US$30m from Fernandes and fellow AirAsia investors.
Fernandes said the market will “polarise” if AirAsia’s gamble pays off and is repeated around the globe. “If this is successful you will get market segmentation, with 5-star airlines and 3-star airlines,” he said.
AirAsia aims to operate 25 planes on long-haul routes by 2013, with the target of carrying nine million people per year. AirAsia hopes to lure British passengers to Kuala Lumpur by offering connecting flights to its many short-haul destinations that include Bali.
Source: Guardian Unlimited
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