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AirAsia may consider dividend after sale of plane-leasing unit

Wednesday, January 18, 2017 - 07:50

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AirAsia Bhd, the region's biggest budget airline, is likely to use most of the proceeds from a proposed sale of its aircraft-leasing arm to pay a dividend, its chief executive officer said in an interview.

[SINGAPORE] AirAsia Bhd, the region's biggest budget airline, is likely to use most of the proceeds from a proposed sale of its aircraft-leasing arm to pay a dividend, its chief executive officer said in an interview.

The airline expects to get binding bids for the unit by March and close the deal by summer, Group CEO Tony Fernandes, 52, said in a Bloomberg Television interview with Francine Lacqua in Davos, Switzerland, while attending the World Economic Forum. The board of the Sepang, Malaysia-based carrier will take the final call on whether to use the proceeds to pare debt or pay a dividend, he said.

"Our gearing is very low anyway but I always like to have more cash than less cash," Mr Fernandes said. "But it's really up to the board to finally decide what to do with that."

The divestment of Asia Aviation Capital Ltd may help bolster the financials of the carrier that has ordered hundreds of jets from Airbus SE and had a net debt of 8.8 billion ringgit (S$2.81 billion) at the end of September. A dividend may also cheer investors who were rewarded with a 78 per cent rally in the shares in 2016, the best in six years. The asset had received an offer valued at about US$1 billion, Mr Fernandes had said in May.

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Established in 2014, Asia Aviation Capital had a fleet of 59 planes as of end-September, leased primarily to the parent's affiliates. The unit will receive an additional 100 Airbus A320 aircraft and get some A321neos were ordered last year.

Asia Aviation Capital manages aircraft leased to affiliates outside Malaysia, including Thai AirAsia Co, PT Indonesia AirAsia and AirAsia India Pvt, according to filings in 2014. RHB Investment Bank Bhd, Credit Suisse Group AG and BNP Paribas SA are joint advisers to the sale.

"Some people have come in at the last minute," Mr Fernandes said, referring to bidders. "We're working with Credit Suisse and the banks to see if they can still make the timeline," he said, declining to reveal names.

As airlines serving Asia Pacific move to triple their fleet, they're finding it can be cheaper to lease jets instead of buying them from Boeing Co or Airbus. The relative safety of the leasing business compared with that of an airline has prompted conglomerates led by Hong Kong billionaires Li Ka-shing and Cheng Yu-tung to enter the industry.

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