Exclusive: AirAsia to launch sale of leasing arm, could value unit at $1 billion - sources

SINGAPORE (Reuters) - AirAsia Bhd AIRA.KL, Asia's biggest budget airline, will kick off the sale of its leasing unit this month, seeking to cut debt with a deal that could value the business at about $1 billion, people familiar with the matter told Reuters.

An AirAsia plane prepares for take off at Don Mueang International Airport in Bangkok, Thailand, June 29, 2016. REUTERS/Chaiwat Subprasom/File Photo - RTSKYWR

A successful deal would help Group CEO Tony Fernandes, one of Asia’s best-known entrepreneurs, to bolster AirAsia’s finances and spur growth.

At an overall valuation of $1 billion, the sale would be significant for a carrier with a market value of $2 billion.

AirAsia is looking to sell a majority stake in the leasing unit, Asia Aviation Capital (AAC) but is also open to a full sale, sources said, adding that the final valuation could change depending on talks with potential buyers.

They said AirAsia was considering paying a special dividend from the proceeds. The people declined to be identified because the discussions were confidential.

AirAsia declined to comment.

The Malaysia-based carrier plans to tap potential suitors including the leasing units of China's HNA Group, China Merchants Bank 600036.SS, and the aviation leasing company backed by Hong Kong billionaire Li Ka-shing for the sale, the people familiar with the matter said.

China Merchants Bank, HNA Group and Li's Cheung Kong Infrastructure Holdings Ltd 1038.HK did not respond to Reuters' requests for comments.

Fernandes, who built up AirAsia into multi-billion dollar business from a two-plane operation in 2002, is cashing in on a booming leasing sector after AirAsia ordered hundreds of Airbus planes at bargain prices in recent years and emerged as one of Airbus' AIR.PA biggest customers.

AirAsia responded to a critical research report last year by Hong Kong-based GMT Research saying it stood by its accounts. [nL3N13M17L]

“This is a landmark transaction if Tony manages to pull it off,” said Shukor Yusof, founder of Malaysian aviation consultancy Endau Analytics, adding that AirAsia could use the funds to invest in its businesses in India, Indonesia and Japan.

Sources said AirAsia was expected to approach about a dozen suitors including infrastructure and pension funds to bid for the leasing company.

“Aircraft are good U.S. dollar denominated, cross border assets to own,” said Yusof.

AirAsia has a fleet of some 170 jets operating across Thailand, Philippines, India, Indonesia and Malaysia and competes with the likes of Indonesia's Lion Group, Singapore Airlines SIAL.SI, Qantas Airways QAN.AX, Malaysian Airlines and some of their budget affiliates.


Deal making is picking up in the $228 billion global plane leasing sector, with Asian lessors grabbing a bigger share, buoyed by the growth in China.

“This is a way to unlock the value of the aircraft orders while also managing AirAsia’s balance sheet,” said one person familiar with the matter.

In a regulatory filing in May, AirAsia said it had received preliminary interest for AAC.

AirAsia has hired Credit Suisse, BNP Paribas and RHB Bank to handle AAC’s sale and expects to complete it by early next year, the people familiar with the matter said.

BNP Paribas and RHB Bank declined to comment, while Credit Suisse did not respond to Reuters requests for comments.

Though AAC has only 55 planes, primarily leased to AirAsia affiliates outside Malaysia, it expects to get more aircraft from the airline and lease them to other airlines.

This month, AirAsia said 30 percent of its order of 100 Airbus A321neo jets would be allocated to AAC. [nL8N19Y5XJ]

AirAsia’s shares have jumped to three-year highs after more than doubling this year as the airline benefited from a sharp fall in fuel prices. It reported a nearly six-fold jump in net profit for January-March.

Editing by Denny Thomas/Ruth Pitchford