AirAsia X Has Second-Worst Trading Debut in Malaysia

(Corrects to clarify total proceeds from the IPO in first paragraph.)

AirAsia (AIRA) X Bhd., the long-haul arm of Asia’s biggest budget carrier, had the second-worst trading debut in Kuala Lumpur in a year after completing a 988 million ringgit ($310 million) initial public offering.

The carrier closed at 1.25 ringgit in Kuala Lumpur, same as the offer price. It was the country’s most actively traded stock with more than 160 million shares changing hands. The benchmark FTSE Bursa Malaysia KLCI Index (FBMKLCI) rose 0.1 percent.

The share sale will help AirAsia X to take on debt to expand its fleet as the carrier plans to set up hubs in Thailand and Indonesia along with its partners, Chief Executive Officer Azran Osman-Rani said in an interview today. The IPO last month survived market turmoil brought on by concerns that the U.S. Federal Reserve will reduce stimulus and China’s economic slowdown may deepen.

“Right from the beginning we didn’t expect much from the initial listing,” said Ang Kok Heng, who bought the stock in the IPO as chief investment officer at Phillip Capital Management Sdn., where he helps manage $428 million. “This stock is meant for the long run.”

AirAsia X may also consider an additional hub in Chennai in south India, Azran said in a Bloomberg Television interview with Rishaad Salamat. The hubs in Thailand and Indonesia will help the carrier fly to Australian and Asian cities that are currently served from its Malaysian base, he said.

Fleet Expansion

The airline’s fleet will rise to 15 this week as it takes delivery of its 13th Airbus SAS A330-300, Azran said. AirAsia X, a spin-off from Tony Fernandes’ AirAsia Bhd., is adding more aircraft as it seeks to fend off rising competition from Singapore Airlines Ltd. (SIA)’s long-distance budget unit Scoot that started flying last year.

Discount airlines in Southeast Asia ordered at least 1,000 new aircraft in the past five years as economic expansion enables more people in countries such as Indonesia, Thailand and Vietnam start flying. Some 15 low-fare carriers started operations in the past decade across Asia-Pacific, the most profitable region worldwide for at least the fourth consecutive year, according to the International Air Transport Association.

Shares of AirAsia fell 0.6 percent to 3.21 ringgit, paring its gain this year to 17 percent.

Market Value

AirAsia X, which has a market value of about 3 billion ringgit, priced its IPO at 1.25 ringgit per share for both institutions and individuals. The company, based in Sepang, Malaysia, had marketed shares to institutional investors at 1.15 ringgit to 1.45 ringgit.

AirAsia X follows Astro Malaysia Holdings Bhd. (ASTRO) in closing unchanged on the first day of trading in Kuala Lumpur in the past year, according to data compiled by Bloomberg. CLIQ Energy Bhd. (CLIQ) was the only stock to fall on its debut in the city in the past 12 months, dropping 24 percent, the data show.

Tune Ins Holdings Bhd. (TIH), an insurance company also set up by Fernandes, had the third-worst start, rising 0.7 percent on its first day of trade in February, according to data compiled by Bloomberg.

The IPO of AirAsia X is the second of the three proposed listings by affiliates of AirAsia as the group raises funds to accelerate expansion. In December, the airline ordered 100 Airbus A320s valued at $9.4 billion, in addition to the 200 it had agreed in 2011 to purchase. The carrier is also adding a unit in India through a venture with Tata Group.

Indonesia Plans

AirAsia’s Indonesian venture may sell shares in the fourth quarter, Fernandes said last month in Chennai. The carrier expects to raise $250 million from the IPO, he said.

Budget carriers’ market share in the Asia-Pacific region rose to 24 percent last year from 1.1 percent in 2001, according to the CAPA Centre for Aviation, an industry consultancy.

Total traffic for the region will expand 6.4 percent a year during the next 20 years, according to Boeing Co. In that period, almost half of the world’s air traffic growth will be driven by travel to, from or within the Asia-Pacific region, the planemaker said.

Airlines globally are likely to generate net income of $12.7 billion in 2013 as capacity cuts help pack planes to record levels, IATA said last month. Carriers in all regions should post a profit this year, led by airlines in Asia with projected earnings of $4.6 billion and North America with $4.4 billion, according to IATA .

To contact the reporter on this story: Chong Pooi Koon in Kuala Lumpur at pchong17@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

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