June 10 (Bloomberg) -- AirAsia X Bhd. and Nok Airlines Co. said they will sell shares in initial public offerings to fund expansion plans as economic growth in Asia spurs travel demand.
AirAsia X, the long-haul arm of Asia’s biggest budget carrier AirAsia Bhd., plans to raise as much as $370 million through an offering in Malaysia, according to the term sheet obtained by Bloomberg News. Nok Air, a budget carrier controlled by Thai Airways International Pcl, plans to collect 3.25 billion baht ($106 million) from its IPO, the company said.
Budget airlines in Southeast Asia ordered at least 1,000 new aircraft in the past five years as economic expansion across the region enables more people to start flying in countries such as Indonesia, Thailand and Vietnam. Some 15 low-fare carriers started flying 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.
“The growing number of middle class with the economic growth in this region will help increase Asian travel demand,” said Siyi Lim, an analyst at OCBC Investment Research in Singapore. “The budget carriers will benefit more on this because there’s still a lot of people who haven’t flown before.”
Institutional investors can bid for AirAsia X, based in Sepang, Malaysia, at a range of 1.15 ringgit to 1.45 ringgit apiece, according to the term sheet. The carrier can raise up to $426 million if it exercises its greenshoe option. The price for individual investors was set at 1.45 ringgit, according to the prospectus filed in the Star newspaper today.
Proceeds from the IPO will help repay bank borrowings and set up new hubs, the carrier said.
The airline is offering 10.6 percent of its capital to individual investors and 14.4 percent to institutions, according to the prospectus. The final sale price for individuals may change if the institutional price is lower, it said. The offer for institutional investors closes on June 24 and the listing will be on July 10.
“We have an early mover advantage in the low-cost, long-haul segment globally, which is poised for substantial growth in coming years,” AirAsia X said in its prospectus. “We believe we have the lowest unit operating cost base of any airline in the world.”
AirAsia gained 0.6 percent to close at 3.35 ringgit in Kuala Lumpur trading.
This 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.
CIMB Group Holdings Bhd., Malayan Banking Bhd., Credit Suisse Group AG and Morgan Stanley are joint global coordinators for the offering. Barclays Plc, BNP Paribas SA, Citigroup Inc., CLSA Ltd. and HSBC Holdings Plc are helping manage the offering.
Aero Ventures Sdn., owned by AirAsia Group CEO Tony Fernandes and three others, will cut its stake in the airline to 34.4 percent from 52.2 percent through the IPO. Japan’s Orix Airline Holdings Ltd. and Bahrain’s Manara Consortium will each reduce their holdings to 6.4 percent from 10.9 percent after the share sale, according to a prospectus filing with the Kuala Lumpur stock exchange today. AirAsia Bhd. won’t be cutting its interest.
Nok Air will sell 187.5 million shares, including those owned by Aviation Investment International Ltd., at 26 baht apiece in the offering and expects to start trading on the stock exchange on June 20.
“Our growth strategy is to focus on domestic routes first and foremost,” Patee Sarasin, Nok’s chief executive officer, said in the statement. “I strongly believe Thailand is poised to become the regional air travel hub, thanks to its strategic location.”
Nok will use proceeds from the IPO for aircraft procurement and working capital.
Siam Commercial Bank Pcl is the financial adviser and SCB Securities Co. is the lead underwriter.
Thai Air, which owns 49 percent stake in Nok Air, advanced 4.9 percent to close at 32 baht in Bangkok trading.
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 jet maker 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, it said.
Asian Plane Orders
Asia Pacific overtook North America as the world’s biggest aviation market in 2009, according to IATA. The region’s passenger growth, both domestic and international, is expected to add about 380 million travelers between 2012 and 2016 to 1.2 billion, IATA forecast in December.
That growth forecast prompted Lion Air in March to place an order for 234 aircraft from Airbus, its second commitment in two years to purchase more than 200 planes. Including turboprop aircraft, the airline has a total of 700 planes on order.
AirAsia has grown into Asia’s biggest discount airline since its takeover by Fernandes and partners in 2001. In 2011, AirAsia ordered 200 Airbus A320neo aircraft valued at $18 billion.
Asia will be able to take in more aircraft as economic growth and a population of more than 3 billion people will sustain travel demand, Fernandes said in March.
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 earlier this 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, IATA said.