No-frills airline AirAsia expects to offer its first Islamic bond issue later this year to help finance the purchase and lease of 11 Boeing 737-300 aircraft, officials said today.

"The issuing of Islamic bonds is progressing well. We are happy with the progress. The debt market is showing lots of confidence in AirAsia," its chief executive Tony Fernandes told reporters.

The company aims to offer RM160 million in 7-year Islamic bonds by September or October. An Islamic bond is a debt instrument that adheres to Syariah principles which prohibit the payment of interest.