AirAsia to Raise 1 Billion Ringgit in Share Sale to Founders

  • AirAsia to sell 559 million shares at 1.84 ringgit to Tune
  • Tune controlled by group CEO Fernandes, Chairman Kamarudin

AirAsia Bhd. is raising 1 billion ringgit ($257 million) selling stock to a company controlled by its founders as the continent’s biggest budget airline raises cash to finance aircraft purchase and pare down debt.

The airline will issue 559 million new shares at 1.84 ringgit apiece to Tune Live Sdn, equally owned by Chief Executive Officer Tony Fernandes and Chairman Kamarudin Meranun, AirAsia said in a statement to the Kuala Lumpur stock exchange Friday. The sale represents 16.7 percent of the enlarged capital of the Sepang, Malaysia-based carrier.

Fernandes and Kamarudin control another company Tune Air Sdn, which is the largest shareholder of the airline at 18.9 percent. That holding company’s stake in AirAsia will decline to 15.7 percent after the new share sale.

AirAsia is the second-best performing stock on the MSCI Asia Pacific Index this year amid speculation that its key shareholders could step in to strengthen its finances or take the company private. Mounting competition from Malaysia Airlines Bhd. and low-cost carriers led to a drop in ticket prices in the region and the carrier’s stock dropped to its lowest in August last year.

Southeast Asian airlines, particularly budget carriers, have suffered from a price war as they jostle for market share. Short-haul yields at carriers in the region will continue to be squeezed this year as airlines add capacity, Bloomberg Intelligence said last month.

Fernandes, 51, assumed 40 million ringgit of debt when he bought AirAsia for 1 ringgit in December 2001, according to the airline’s website. The carrier had two old aircraft when Fernandes took charge. Prior to running AirAsia, Fernandes was an employee at Richard Branson’s Virgin Group.

The budget carrier now has more than 100 planes with operations spanning India, the Philippines, Indonesia and Thailand. The company, which plans to start flights at its Japan venture this year, is one of the biggest customers for Airbus Group SE’s narrowbody aircraft.

Before it's here, it's on the Bloomberg Terminal.