SIN­GA­PORE

The Pak Banker - - COMPANIES/BOSS -

AirAsia Bhd. re­ceived an of­fer val­ued at about $1 bil­lion for its air­craft-leas­ing busi­ness, Chief Ex­ec­u­tive Of­fi­cer Tony Fer­nan­des said, prompt­ing the shares to reach a new 14month high in Kuala Lumpur trad­ing.

Asia's big­gest dis­count car­rier in­tends to di­vest the fully-owned unit called Asia Aviation Cap­i­tal Ltd. at some point, Fer­nan­des said in an in­ter­view with Bloomberg Tele­vi­sion Mon­day. The com­pany needs to fur­ther dis­cuss the of­fer with the board, he said, with­out iden­ti­fy­ing the bid­der.

"We ac­tu­ally had an of­fer to buy it and I think this is a very pow­er­ful cash gen­er­a­tor," Fer­nan­des said. "There's tremen­dous value and cash equa­tion there."

As air­lines serv­ing Asia Pa­cific move to triple their fleet, they're find­ing it can be cheaper to lease jets in­stead of buy­ing them from Boe­ing Co. or Air­bus Group SE. The leas­ing busi­ness can be more lu­cra­tive than op­er­at­ing an air­line, which has prompted con­glom­er­ates led by Hong Kong bil­lion­aires Li Ka-shing and Cheng Yu-tung to en­ter the in­dus­try. Fer­nan­des's comments comes as Asia's big­gest lessor is slated to start trad­ing in Hong Kong Wed­nes­day af­ter a HK$8.7 bil­lion ($1.1 bil­lion) initial pub­lic of­fer­ing.

AirAsia shares gained 0.4 per­cent to 2.41 ring­git, the high­est clos­ing price since March 6, 2015. They rose as much as 4.2 per­cent ear­lier in the day. The stock has jumped 87 per­cent this year, helped by the car­rier's surge in prof­its.

"It was in­ter­est­ing that we haven't even gone to the mar­ket and some­one ap­proached us on it, be­cause obviously we have some very valu­able as­sets in our A320s and a very strong or­der book," Fer­nan­des said.

AirAsia, one of the big­gest cus­tomers of Air­bus's sin­gleaisle A320 jets, started the leas­ing com­pany in 2014. It made its first deal out­side the group by leas­ing out air­craft to Pak­istan In­ter­na­tional Air­lines Corp., Fer­nan­des said, adding that more air­lines are seek­ing to rent its planes. The unit had 43 A320s in its fleet as of the end of March.

"AirAsia doesn't need to sell the leas­ing arm now be­cause its bal­ance sheet is al­right and it will get cash in­fu­sion from found­ing share­hold­ers," said Mohshin Aziz, an an­a­lyst at Malayan Bank­ing Bhd. in Kuala Lumpur. "As a busi­ness you want to have as many av­enues and the leas­ing arm opens an av­enue for AirAsia should it need to raise cash." AirAsia op­er­ated 171 A320s in its fleet at the end of March. The group's medi­u­mand long-haul budget car­rier, AirAsia X Bhd., had 29 A330s. Asia Aviation Cap­i­tal will only man­age those group air­craft leased to af­fil­i­ates out­side Malaysia, in­clud­ing Thai AirAsia Co., PT In­done­sia AirAsia and AirAsia In­dia Pvt., ac­cord­ing to fil­ings in 2014. Air­lines in Asia will fly more than 16,000 planes within 20 years, al­most tripling the cur­rent num­ber, ac­cord­ing to es­ti­mates by Boe­ing.

Fer­nan­des said in 2014 that AirAsia's jet-leas­ing arm is a po­ten­tial can­di­date for a stock ex­change list­ing that could com­mand half the then­value of its $2 bil­lion air­line oper­a­tion. Free cash-flow of about $40 mil­lion to $50 mil­lion will be gen­er­ated in the spun-off unit's first few years, before ex­pand­ing to­ward $100 mil­lion as it taps de­mand for planes from air­lines in China and Africa, he said then.

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