AirAsia Takes Off

AirAsia, the Malaysia-based budget carrier with the black leather seats and the perky flight attendants, appears on course to join the world’s big air carriers, expanding aggressively across the region, with plans to buy hundreds of new aircraft.

The carrier hopes to raise US$150-200 million in an IPO slated for the Jakarta Stock Exchange in the fourth quarter of this year, company officials say, underwritten by CIMB-Indonesia and Credit Suisse.

Earlier this month AirAsia announced that its Malaysian parent is purchasing a record 300 Airbus Industrie A320 neo jets for a reported $27 billion, the largest ever airline order -- until it was superseded Wednesday when American Airlines announced it is buying 460 single-aisle aircraft from both Airbus Industrie and Boeing for US$38 billion. Nonetheless, the AirAsia order vaults the carrier well up the order of the world’s airlines.

The world’s largest airline by fleet size is Delta, with 744 planes, followed by United, with 712, and Lufthansa, with 710.

A spokesman said that “at least” 175 planes are to be added to the current Asia fleet by 2015, nearly tripling current capacity. AirAsia Indonesia earlier said that it expects local passenger numbers to grow 15 percent this year.

Southeast Asia “is as big as Europe,” AirAsia’s Indonesia CEO, Dharmadi said while en route to a Tokyo press conference. “So [CEO Tony Fernandez] thinks we need 500 aircraft. If we do that, there is no reason we would not be No.1 in Asia.”

The airline's Indonesian unit has posted rapid growth in the budget sector and is looking forward to further expansion, according to Dharmadi, who was head of operations for Garuda Indonesia before joining AirAsia three years ago.

“We are now No. 1 in passengers carried on international routes out of Indonesia," he said, citing traffic to Malaysia and Kuala Lumpur from Jakarta, Bali, Medan, Surabaya and Bandung. The local carrier reported this month that it had flown 2.35 million passengers in the first half of the year, up 28 percent on the same period in 2010. Total passenger numbers for last year were in turn up 13 per cent on 2009.

AirAsia will soon open a major regional headquarters in Jakarta to serve as the company's head office.

“It will be the central office for investors to communicate with the company and for relations with Asean,” Dharmadi said.

The planned 2015 launch of the Asean “open skies” policy is a major reason for the opening of a Jakarta office, which will also be able to lobby Asean directly for the continued loosening of previously restricted Southeast Asian markets.

Launched by Fernandez and three partners in 2002 as a regional no-frills carrier with just two aircraft, the carrier is closely modeled on Richard Branson's Virgin brand and the US budget carrier Southwest Airlines. In 2010 it carried its100 millionth passenger.

The airline's current fleet is 93 planes flying regionally for three related companies, all of which are incorporated as joint ventures in their home markets - Malaysia, Indonesia and Thailand. A fourth partner, AirAsia Philippines, will start flying in September with Vietnam expected to follow closely behind.

In addition to the regional business, a budget long-haul service, AirAsia X, has flights to Europe, Japan and Korea from its Kuala Lumpur hub. That company is a joint venture between Fernandez and Branson.