No-frills airline AirAsia has struck a deal with three foreign partners to take up a stake in the profit-making carrier and will issue Islamic bonds to fund the acquisition of new aircraft, senior officials said today.

"I am excited with the latest development. It shows foreign investors have confidence in our country, especially during these troubled times," AirAsia chief executive Tony Fernandes told AFP .

"The airline business now is extremely volatile but a decision by investors to come o­n board demonstrates their faith in the carrier."

Fernandes said the capital injection, which he puts at around RM50 million ringgit, by the foreign partners will help finance AirAsia's purchase of four Boeing 737-300 aircraft.

When asked who the new investors were, he declined to reveal details.

New strategic partners

However, another official familiar with the deal told AFP that three foreign partners consisting of an Asian, Middle East and European would be coming o­nboard with their capital.

The official, who spoke o­n condition of anonymity, said the three new strategic players would take about a 25 percent stake in the 18-month old airline.

Fernandes said an application was recently forwarded to the Foreign Investment Committee for approval and a formal announcement o­n the new shareholdings would be made by the end of May.

Five individuals currently control the company which has 500 employees, with Fernandes holding a 25 percent stake.

Kamarudin Meranun, AirAsia's executive director, said the company would issue Islamic bonds worth RM150 million to fund the acquisition of new aircraft and to be used as working capital.

"We hope to launch it before October. It will be a five- to seven-year bond. We have spoken to a few local banks but no agreement has been sealed," he said.

AirAsia plans to increase its fleet by eight to 15 by this year. Half of the new aircraft would be leased.

The fleet expansion is needed to serve new destinations, including southern Johor state and Sarawak's oil rich town of Bintulu o­n Borneo island.

Sars unlikely to hamper growth

The airline, which began domestic flights in December 2001, now boasts a fleet of seven leased Boeing 737-300s and has been described as a "vibrant and profitable low-cost airline" after early criticism that it would fail within three months.

AirAsia has said it will not scale back its expansion plans due to the outbreak Severe Acute Respiratory Syndrome, saying Sars was unlikely to threaten its revenue or hamper growth.

Fernandes said that in the last two months, the airline recorded an average load factor of around 80 percent for most of its destinations.

"Based o­n the favourable passenger volume, we target a RM20 million profit and RM350 million turnover for the current financial year ending this June," he said.

From January to April this year, AirAsia carried a total of 525,142 passengers, up from 231,839 passengers for the same period last year. It said 40 percent of its ticket sales worth RM50 million were bought over the Internet.

Fernandes recently said that while airlines were struggling globally and pursuing cost cuts, AirAsia would continue with its route and fleet expansion.

"We are undeterred. We are confident of achieving what we set out to achieve," he said. - AFP