AirAsia chief to scout for more fundraising after SPAC listing

Options for fundraising include revisiting plans for an initial public offering of aviation assets in the Philippines, doing a share placement in Indonesia, and eventually listing a host of nonaviation units, Fernandes said in an interview.

“We might use a public company [in Indonesia] to raise some more capital through a placement," he said. “And we will look to list the Philippines entity," floating 20% or 30% of shares, he said, referring to the company’s Manila-based aviation unit.

He didn’t provide further details about the possible fundraising, saying only that any moves would come after a restructuring and merger of aviation assets in the works. The group has one company listed in Jakarta, AirAsia Indonesia.

AirAsia, Southeast Asia’s largest budget carrier with an order book of more than 600 Airbus jets, is in the middle of a multiyear comeback after the pandemic and intense regional competition withered away sales and battered its bottom line.

The group is seeking to pivot away from heightened regulatory scrutiny on Malaysia’s stock exchange—where shares of AirAsia operator Capital A are trading lower than when they first listed in 2004—to expanding into a low-cost global aviation juggernaut capable of flying to London, Cairo, New York and beyond.

Part of the way forward depends on continued recovery in air travel and boosting operational efficiencies across Asia. Capital A, holder of most of the group’s airlines and several nonaviation assets, last month said it booked full-year revenue surpassing prepandemic levels, helped by reopened Asia borders and higher ticket prices. 

It continued to post a net operating loss, however, on higher depreciation and finance costs and the price of returning jets into service.

Fernandes, a former Time Warner executive who acquired AirAsia and its debt from the Malaysian government for a token figure of 1 ringgit in 2001, suggested the worst is nearing an end.

“The fare is up and demand is stronger," he said. “I think by 2025, 2026, we will really start to grow again."

Capital A said last month that it plans to add more than 60 new flight routes in Asia, including in China, India and Cambodia, and said competition in two of the group’s biggest markets—Malaysia and Thailand—appears to be easing. 

One of his goals for the year is to return a full fleet of more than 200 jets to service, up from 185 planes at the end of December.

“After three years of not flying, you know, we lost a little bit of" energy, he said. “The energy is coming back."

Next up is a $200 million bond issuance slated for this quarter, to be led by U.S. banks Citigroup and Evercore. Then he plans to merge aviation units, clear Capital A’s financially distressed designation on the Malaysian exchange and, by the middle of the year, list AirAsia’s branding unit in the U.S.

That listing, via a merger with a special-purpose acquisition company that values the unit at more than $1 billion, will seek to capitalize on Western investors eager to tap the consumer story of fast-growing Southeast Asia.

The branding unit intends to franchise the AirAsia name for airlines and other businesses such as hotels. “Many countries want us to start an airline outside" of Southeast Asia, Fernandes said.

“I know SPAC is a dirty word," he added, but “I think the difference between us and some…SPACs is [that] this is a real business with real cash flows. And so it’s up to us to show the American market how we’re going to develop the AirAsia brand."

In the longer term, Fernandes, 59, also wants to unlock value from nonaviation companies currently under Capital A by listing them. Those businesses accounted for just 7% of the company’s revenue in the fourth quarter.

For now, the main focus is on restructuring and aviation recovery.

“There is a great disconnect between what is implied with [Capital A’s distressed-company] status and what is going on [on] the ground," said Maybank Investment Bank analyst Samuel Yin Shao Yang, citing higher fares, reduced competition and expectations that losses will narrow in coming quarters.

While other competitors are rebuilding fleets after the pandemic, that will take some time, and it will unlikely be at the level of “irrational competition" the industry saw before the pandemic, Yin said.

Since then, Yin said, “no one has gone out to saturate the market."