Despite regional challenges, AirAsia pushes IPO of Philippine unit

PAMPANGA, Philippines – The local unit of AirAsia Group Berhad, Southeast Asia’s biggest budget airline, will move forward with its planned initial public offering (IPO) by the end of the year despite challenges the group is encountering across the region.

“We have a board meeting on Friday, May 25, and we are in the process of going through the regulatory issues with the Philippine Stock Exchange (PSE),” AirAsia Group chief executive Tony Fernandes said on Thursday, May 17.

“We need some clearances from the board to wipe out our negative equity,” Fernandes added.

AirAsia Group Berhad saw its shares dip by 10% on Monday, May 14 – the first trading session in Malaysia since its election – after Fernandes apologized for endorsing former Malaysian prime minister Najib Razak.

Najib lost to Mahathir Mohamad, the 92-year-old former Malaysian prime minister, in a shock election last week. AirAsia Group has operations across Asia, but Malaysia serves as its home base, providing the bulk of the group’s total earnings.

“I am sorry for what has gone on. I buckled at the crucial moment in our history,” Fernandes said in a video released on Sunday, May 13. On Thursday, May 17, AirAsia Group Berhad stocks recovered by inching up by 0.29%.

Aside from a political setback in its home market, the AirAsia Group was hit by the 6-month closure of top tourist draw Boracay Island, as the airline stopped flights to and from Caticlan and Kalibo during that period.

But for Fernandes, the Boracay closure has no significant impact on the airline and will not push back its planned debut on the PSE. (READ: From 2 jets to 70: AirAsia returns to its Clark roots)

“We were able to redirect our traffic to other parts of the Philippines. We were quite nimble on that, so it wasn’t a massive impact for us,” he added.

“We’re doing very well in the Philippines right now,” Fernandes said, adding that he hopes Philippines AirAsia’s planned IPO will raise “more than $250 million,” which will be used for the airline’s expansion plans.

‘Best kept secret’

Fernandes said the Philippines is the AirAsia Group’s “best kept secret,” with the group investing more in the country by adding more routes and buying more planes.

“We’re now at this crossroads. We’ve had a very tough time, we had a baptism of fire when we came in here. We weren’t warmly welcomed by our competitors. They did everything to eradicate us. And now we’ve crossed over that That made us tougher, smarter, and we’re now in a good position,” Fernandes told reporters on the sidelines of an event in Pampanga.

He added: “The Philippines is probably the best kept secret. There’s so much to see, so many places to go. But the connectivity is poor. So what we’re trying to do is build more connectivity. One of the reasons we’re here is we’re big leaders in Clark [in Pampanga].”

The local airline is planning to increase its fleet to 22 jets this year from the current 18 to accommodate its new operations. By 2032, Philippines AirAsia hopes to secure a total of 70 planes, to strengthen connectivity between other destinations in Southeast Asia and the Philippines.

“Our profit is a lot better now than last year. We hope to double our profit next year that is why we are optimistic on our planned IPO. It is just the papers we have to secure now. Our load factor is great when it comes to all our routes,” Philippines AirAsia chief Dexter Comendador told reporters.

Philippines AirAsia flies out of hubs in Manila, Cebu, Kalibo, and Clark. It flies to Manila, Davao, Cebu, Kalibo, Tacloban, Tagbilaran, Puerto Princesa, Clark, Shanghai, Taipei, Incheon, Hong Kong, Macau, Kuala Lumpur, Kota Kinabalu, and Singapore.

Fernandes said the Philippines is the “4th largest” driver in terms of passenger traffic.

“But it’s growing very very rapidly. The Philippines is growing. It’s a very important part of the jigsaw puzzle,” he added. – Rappler.com