AirAsia in RM380m aircraft deal

  • Business
  • Thursday, 19 Jun 2003

By p.w.thong

AirAsia Sdn Bhd entered into leasing and purchasing agreements worth some US$100mil (RM380mil) yesterday to increase its fleet by 11 aircraft. 

AirAsia chief executive officer Tony Fernandes said Asia's first and only low-fare, no-frills airline company would have 18 aircraft when delivery was completed by the middle of next year, against the current seven. 

The company will lease seven Boeing 737-300 aircraft and acquire four of the same model from GE Capital Aviation Services. Delivery of the first aircraft is expected to take place before October this year, with the last arriving by June next year. 

Fernandes told reporters after the agreement signing in Subang that the increase in AirAsia's fleet would underpin the airline's growth and expansion plans and provide the company with the ability to expand its service through increased flights to existing destinations and opening new routes. 

Tony Fernandes (right) exchanging agreements with GE Capital Aviation Services managing director for Asia Pacific Michael Jones, witnessed by AirAsia stewardesses.

“These 11 aircraft will enable AirAsia to meet the huge demand for more low fares in Malaysia. It will help us to further reduce our current unit cost of 2.5 sen per average seat per km, already the lowest in the world.  

“Our customers are already enjoying unprecedented low fares and this next step in our expansion will enable even more Malaysians and visitors to Malaysia to experience our great service,'' he said. 

The lease and purchase of the aircraft will be financed by AirAsia's own cashflow. 

Fernandes also said AirAsia, apart from placing out some of its shares to three unidentified international investors for more than US$30mil, was also considering tapping the debt market to raise about RM150mil to fund its expansion programme.  

He said the company was deciding between an Islamic bond issue and a loan from Exim Bank. 

Asked if AirAsia would expedite its regional expansion with the newly acquired aircraft – originally scheduled for next year – Fernandes said AirAsia planned to expand its domestic reach first before reaching out to the region.  

But, he said, the company had already obtained landing rights for cities in Indonesia, Thailand and the Philippines. 

He also said the company was not concerned by news that some other bigger airlines were planning to go into the low-fare airline business.  

“The market for low fare is huge in Asia and there's room for other players. We are open to competition and more players as long as the competition is done in a fair manner,'' Fernandes said. 

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