Air Asia Indonesia set to float shares on local stock market

Low-cost carrier Air Asia Indonesia (AAI) plans to sell 20 percent of its shares later this year, making it the second airline to float shares on the local stock market after national flag carrier Garuda Indonesia.

AAI chief executive officer Dharmadi said Thursday that the airline, a subsidiary of Malaysian Air Asia, was expected to launch its initial public offering (IPO) in the fourth quarter of this year.

He said the airline expected to raise between US$150 million and $200 million from the IPO. “The IPO proceeds will be used to procure new airplanes, to boost capital, to finance long-term operational costs and to speed up corporate growth,” he said.

Currently, Malaysia-based AirAsia Berhad holds a 49 percent stake in the company. Indonesian shareholders hold the remaining 51 percent, including Sendjaja Widjaja with 21 percent, Harris Family (Pin Harris) with 20 percent and trading company PT Fersindo Nusaperkasa with 10 percent.

Dharmadi said that a part of the IPO proceeds would be used to purchase new planes to increase its fleet to 30 by 2015. The airline currently operates 20 planes, 16 Airbus and four Boeing jets.

He said the airline had appointed two securities companies — Credit Suisse and CIMB Securities — as the IPO’s underwriters. Dharmadi said he was optimistic that the IPO would receive a strong response from the market even though Garuda’s public offering failed to meet investor expectations.

Although underwriters claimed the IPO was oversubscribed, Garuda’s share price plunged 7 percent to Rp 700 from its IPO price of Rp 750 in its debut on the stock exchange last month.

The promising prospects of the budget airline will lure investors to buy AAI shares, Dharmadi said.

“The budget airline market is growing fast in Asia. In South Asia, the budget airline market has increased by 10 percent,” he said.

The company, which has flown 15 million passengers since 2005, had total revenues of Rp 2.76 trillion in 2010, a 37 percent increase from last year. The airline’s net profit rose 350 percent to Rp 474 billion during the year thanks to a surge in the number of passengers and the company’s cost-efficiency program.

“This year, we hope to book a net profit of Rp 500 billion with total revenues of Rp 3.3 trillion,” he said, adding that the number of passengers was also projected to increase 15 percent to 4.5 million this year.

According to Dharmadi, AAI will conduct an IPO roadshow in Jakarta, Medan, Surabaya, Singapore, Hong Kong, New York, Los
Angeles and London. “But, we have not scheduled the roadshow yet,”
he added.

The airline, which was named the world’s best low-cost carrier by Skytrax in 2009 and 2010, now has five hubs in Indonesia: Jakarta, Bali, Medan, Bandung and Surabaya.

“We will strengthen our domination in the international market and focus on the domestic market afterwards,” he said. (swd)