ANA and AirAsia row as AirAsia X launches IPO

By Victoria June 11, 2013 13:50

ANA and AirAsia row as AirAsia X launches IPO

Management tension is threatening to derail a budget-airline venture between AirAsia Bhd. and the parent company of All Nippon Airways, indicating the challenges of operating a carrier in Japan.
AirAsia Japan, the JV between ANA with 67% and AirAsia with 33%, looks to be in trouble at this time as the boardroom is, according to sources, not a cohesive environment with which to move the airline forward. This is a surprise given that all knew the problems from the outset with marrying a low-cost operation with the high price of Japanese fees and labour costs coupled with the fact that AirAsia Japan is based at Tokyo’s Narita airport and competes with ANA-owned low-cost airline Peach, which is based at the less expensive and busy Kansai International Airport.
One ANA statement yesterday read: “We are looking for the best ways for the future growth of AirAsia Japan, and that includes possible dissolution”. From the other side of the JV fence, Tony Fernandez at AirAsia told the press: “The problem is not with the model, it’s with management…” Fernandez is convinced that AirAsia Japan will be a success: “But it’s got to be run as a low-cost airline. The difficulties right now…are that we just have different styles of running it,” he stated. The Nikkei newspaper reported earlier on Monday that ANA will acquire AirAsia’s stake in AirAsia Japan.
Meanwhile AirAsia X, published its initial public offering prospectus on Monday, seeking to raise up to $426 million. This will be the largest aviation IPO in the APAC region since Japan Airlines. It is also likely to be one of the largest listings on Bursa Malaysia Securities this year. AirAsia X Bhd is slated to be floated on July 10. Chief executive officer Azran Osman Rani said: “We’ve been talking about it for two years and we feel right now is the most suitable time for this move.”

The IPO is offering up to 790.12 million 15 sen shares at RM1.45 each — with existing shareholders making an offer for sale of up to 197.53 million units and a public issue of 592.59 million new shares. About 75% of the total shares offered are primary shares. The remaining secondary shares are from the existing shareholders. About a third of the total or 252.11 million units will be for retail investors.

Co-founder Tan Sri Tony Fernandes said: “The rationale for offering such a large number of shares for retailers is that we feel we are a retail company and wish to give the retailers a chance.” The retail offering comprises 52.11 units for eligible staff and partners, 50 million shares for eligible passengers and 150 million units for the Malaysian public. The institutional offering will consist up to 538.01 million shares with 197.53 million for Malaysian institutional and selected investors plus 260.74 million units for bumiputra institutional and selected investors.

The airline is looking to raise RM1.1 billion to RM1.3 billion with the IPO with the primary shares raising up to RM859.3 million and secondary up to RM286.4 million.

A third of the funds raised with the primary shares will be used to repay debt, 32.6% for aircraft deliveries, most likely five A330s on order, with 29.7% as working capital.

AirAsia X has its sights on the Australian market along with seemingly everyone else at the moment and aims to open a new route to Adelaide.
AirAsia X is sure to do well but if ANA does indeed buyout AirAsia from AirAsia Japan then can ANA really operate that airline in competition with its Peach in the long term? The AirAsia Japan venture is a bit of a mess – the question is why given that all around the boardroom table know what to do. Peach worked and thus logic would suggest that ANA should be left to get on with it.

By Victoria June 11, 2013 13:50
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