Malaysian low-fare carrier AirAsia has signed a conditional agreement to purchase 49% of grounded Indonesian airline AWAIR and relaunch it under AirAsia branding, as it completed its initial public offering (IPO).

AirAsia has entered into a conditional agreement to purchase 49% of AWAIR, which suspended operations early in 2002, for a token sum of $2. AWAIR launched services in mid-2000, when it became the first new scheduled carrier in Indonesia in more than a decade. It has been seeking new investors for some time.

If final agreement is reached, AWAIR will be relaunched as a low-cost airline using AirAsia's name, giving the fast-growing group a new base of operations at the Indonesian capital Jakarta.

"Assuming the transaction is completed, AirAsia intends to adopt a low-cost carrier model and operate from a hub at Soekarno Hatta International airport in Jakarta," says AirAsia. It would be similar to that of Bangkok-based Thai AirAsia, which is 49%-owned by AirAsia and 51%-owned by a company controlled by Thailand's prime minister.

The AirAsia group has been seeking to expand international operations and cement its status as Asia's largest low-cost airline. AirAsia and Thai AirAsia now serve points within Malaysia and Thailand, as well as Macau, Singapore and destinations in Indonesia.

Thai AirAsia has also applied for rights to serve cities in Cambodia, China, Myanmar and Vietnam.

"AirAsia believes that the growing population in Malaysia (24 million people), Thailand (62 million people) and Indonesia (212 million people) provides an attractive market for the group to stimulate air travel among a population that previously could not afford to travel by air or lives in areas not serviced by other airlines," says the carrier.

Its IPO, meanwhile, raised 863.3 million ringgit ($227 million), which was at the low end of expectations. However, the airline says it is pleased with the result as the tranche for institutional investors is 3.5 times subscribed, while the public offer is 1.5 times subscribed.

Gross proceeds of 717.4 million ringgit were raised from the IPO. AirAsia plans to use the funds in part to revamp its fleet with new narrowbody aircraft from Airbus or Boeing and further expand its international route network.


Source: Airline Business