AirAsia said to plan raising over US$200m from share sale to Tune Air

KUALA LUMPUR (BLOOMBERG) - AirAsia Bhd, the continent's biggest budget airline, is planning to raise more than US$200 million (S$269.7 million) by selling stock to its largest shareholder in a private placement, according to a person familiar with the matter.

The proceeds from selling stock to Tune Air Sdn will be used for working capital and to cut debt, the person said. The placement will be priced near AirAsia's 1-week average share price, the person said.

AirAsia plans to make an announcement later Friday (April 1), the person said. Shares of the budget airline were halted from trading in Kuala Lumpur, pending an announcement.

AirAsia Group chief executive officer Tony Fernandes and chairman Kamarudin Meranun control Tune, which owns 18.9 per cent of the carrier, according to data compiled by Bloomberg. A representative for AirAsia didn't immediately respond to a phone call and e-mail seeking comment. Fernandes didn't immediately respond to an e-mail seeking comment.

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 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 Intelligencesaid last month.

Mr Fernandes, 51, assumed RM40 million 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 Mr 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's narrowbody aircraft.