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AirAsia IPO


By: Marvin Germo | May 20, 2018

IPO for expansion project

The Philippine unit of AirAsia plans to raise more than $250 million through an Initial Public Offering (IPO) that will happen before the end of 2018. It has actually filed the necessary documents and is currently awaiting approval from the authorities. The long-awaited IPO was supposed to be conducted last 2016 but it has been postponed several times. But the good news is, it will finally push through this year and some investors are actually eyeing on the stock already. It is still on the process of securing a clearance from its board to wipe out its negative equity and resolve some regulatory issues with the PSE. The announcement will be given in the next coming months.

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The company has been planning to be listed in the Philippine Stock Exchange (PSE) since 2015 but there have been drawbacks due to losses and extraordinary costs. However, it is initiating the possible listing again this year. AirAsia shares are currently being traded in the following countries: Malaysia, Thailand and Indonesia. Assuming that it will be approved and listed in the PSE, it will be the last one to be listed on the local exchange. Once all of its Southeast Asian operators are then listed, the CEO intends to swap shares in one company so that they may also have a share in the entire airline. With this plan, he intends to form a single holding company that will form one economic unit in the Association of South East Asian Nations (ASEAN).

Direction of AirAsia

The said proceeds of the IPO will be used to fund its expansion project as it plans to open more routes and acquire more planes in the next 10 years. It currently has 22 and the goal is to have 50 more having a total of 72 planes in the future. The company is doing very well so listing it in the local stock exchange will not only help them raise funds for the planned projects but also increase their capitalization to fully reap the opportunities the company is presented with.

Tight Competition on the industry

The Philippine airline industry is dominated by the two giants: Philippine Airlines and Cebu Pacific. Although AirAsia is doing well, it still needs to innovate and compete with the services of the two companies. In terms of pricing their services, AirAsia provides a competitive price but the challenge now is to capture a substantial percentage of the market share. Hopefully, they will be able to sustain their business in the long term. Aside from this, there has also been a political setback in its Malaysian unit to with a bulk of the group’s earnings are earned there.

The CEO expressed these concerns by stating out that the company is stable more than ever and that it is in a good position in the market. He also stated that the Philippines has a great potential, however, it lacks connectivity which is what they want to build and having a low-cost carrier will be of an advantage to them.

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