AirAsia to Sell Leasing Arm as Early as December to Cut Debt (1)

(Bloomberg) -- AirAsia Bhd. expects to sell its aircraft-leasing unit as early as December as the largest customer for Airbus Group SE’s single-aisle jets aims to net as much as $1 billion from the transaction and pare debt.

Proceeds from the sale may be used to reduce debt or pay a dividend, Group Chief Executive Officer Tony Fernandes said in a Bloomberg Television interview with Yvonne Man Tuesday. AirAsia’s board approved the sale process for all or a substantial part of the unit, established in 2014 as Asia Aviation Capital Ltd., the carrier said in a filing Monday.

“Depending on who’s the buyer, and there seems to be tremendous interest, we’ll likely divest all or maybe keep a minority interest for a period and sell out,” Fernandes said.

The divestment may help bolster the financials of the company, which had a total debt of 10.7 billion ringgit ($2.6 billion) at the end of June. Southeast Asia’s biggest discount carrier reported a 41 percent jump in net income for the quarter through June, benefiting from lower fuel costs and a 10 percent increase in passenger volumes in Malaysia.

The company named RHB Investment Bank Bhd., Credit Suisse Group AG and BNP Paribas SA as joint advisers for the transaction. The airline has received an offer valued at about $1 billion for the aircraft-leasing business, Fernandes said in May.

Strong traveler’s demand in Southeast Asia and a bullish outlook in India means AirAsia will be “surprisingly short” of aircraft and may turn to the leasing market, Fernandes said Tuesday.

Shares of the carrier rose for a third day after the company said late Monday that net income rose to 342.1 million ringgit last quarter from 243 million ringgit a year earlier. The stock was last traded at 3.03 ringgit before the mid-day break in Kuala Lumpur.

AirAsia agreed last month to buy 100 A321neos, adding to an order tally of 575 Airbus single-aisle aircraft, 172 of which are already in the fleet. AirAsia will start receiving the A321neos in 2019 and will take delivery of its first A320neos next month, Fernandes said.

(Updates with earnings, debt in fourth paragraph.)

--With assistance from Karolina Miziolek and Kyunghee Park To contact the reporter on this story: Chong Pooi Koon in Kuala Lumpur at pchong17@bloomberg.net. To contact the editors responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net, Lena Lee, Sam Nagarajan

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