Comments On AirAsia Stock Sale

On Star Business AirAsia may sell as much as 20% more stock to cut debt

• KUALA LUMPUR: AirAsia Bhd, South-East Asia’s largest low-cost airline, said it plans to sell new shares to reduce debt in what would be the Malaysian company’s biggest share sale since listing in 2004.
  
  The Sepang-based company plans to issue as much as 20% more stock, it said in a statement to Malaysia’s stock exchange after the close of trading yesterday.
  
  Chief executive officer Datuk Seri Tony Fernandes said last month the company was considering raising about RM500mil in either a stock sale or rights offer.
  
  AirAsia expects to take delivery of about 24 Airbus SAS planes annually from an order of 175 as the carrier adds routes to India and boosts flights to China.
  
  The company will probably sell the stock in a rights offer to shareholders and use the money to lower its ratio of debt to equity, also known as gearing, Mohshin Aziz, AirAsia’s head of investor relations, said by phone.
  
  AirAsia is “trying to reduce risk, trying to get structures where we can reduce the fluctuation impact of the markets, be it interest rates, forex, fuel if we can, to make the business more stable and predictable in terms of our cost component,” he said, adding that a price had yet to be set for the rights offer.
  
  Based on yesterday’s closing price of RM1.15, the share sale could raise as much as RM546mil. – Bloomberg

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Comments:

Hmmm... rather interesting.

From the Star Business article.. soon they have to take delivery of 24 Airbus.

• AirAsia expects to take delivery of about 24 Airbus SAS planes annually from an order of 175 as the carrier adds routes to India and boosts flights to China.

And posted a couple of days ago. Just How Good Is AirAsia Earnings Performance Since Listing?

• Now let's look at its cash/debts issue.
  
  This is AirAsia's first ever quarterly earnings since listing. Quarterly rpt on consolidated results for the financial period ended 30/9/2004
  
  It had piggy bank cash balances of 78.441 million. Total loans stood at 95.456 million.
  
  Its most recent quarterly earnings. Quarterly rpt on consolidated results for the financial period ended 31/3/2009
  
  Piggy bank cash balances now is at 223.991 million. Total loans stood at 6.934 Billion!!!!!!!

Not in great financial health, yes?

And remember that in the posting AirAsia Again, AirAsia has been doing sale and leaseback of aircrafts.

• Unwinding of fleet ownership is key to near-term profits. AirAsia entered into a sale and leaseback agreement for an A320 in Feb 2009, making a RM33m profit. This follows the RM52m gain in 4Q08 from selling two new A320s. This helped ease AirAsia’s stretched balance sheet with a net gearing at 3.7x as at end-1Q09 (end-4Q08: 4.0x).

And when you add it all up, it makes you wonder, doesn't it?

How come AirAsia is not financing via them bankers?

Why?

And how will this stock sale or rights issue help?

If the article is accurate, the 20% stock sale/rights issue will only raise close to some rm500+/- million.

Not much considering AirAsia's debt is at a whopping 6.94 billion and considering the fact that the debts is going to increase because of AirAsia commitment to buy all these new planes!

And it's also so ironic.

It was just a couple of days ago..

• KUALA LUMPUR (AFP)--Malaysian budget carrier AirAsia Wednesday scrapped administrative charges to boost passenger numbers but said it hasn't been hurt by the downturn that has affected most airlines worldwide.

Consider this.... the administrative charges dropped/scrapped/forgo by AirAsia ... would see them lose some 400 million ringgit. ( see here )

• Chief executive officer Tony Fernandes said the company would lose MYR400 million ($113 million) a year by getting rid of the charges but said he wanted to keep a promise of providing the lowest fares.

Well this is why I find it so ironic. Hope my understand or interpretation is not flawed. :D

The CEO wouldn't mind losing 400 million because he wanted to keep a promise of providing the lowest fares.

It's no problem, yes? If your company can afford to keep the promise, do so by all means. Everyone will be proud of you.

But then... now AirAsia says it wants to do a stock sale to raise some 500 million!

Rather so ironic.

How now my dearest?