Malaysia's budget airline AirAsia, which will fly its first regional route tomorrow, plans to float some 25 percent of its shares in late 2004 to fund an ambitious expansion plan and fight off competition, a top official said.

The initial public offering (IPO) will be issued "as early as September 2004 and the quantum we are looking at is US$600 million to US$1 billion," AirAsia executive director Kamarudin Meranun said today.

"We probably will float new shares but it will be as minimal as possible since the aim is only to put the company in a firm footing to meet expansion needs," Kamarudin said.

New regional routes

He said the funds from the IPO would be used to acquire new aircraft to meet AirAsia's expansion plans, which have been accelerated to keep the carrier ahead of potential competition from Indonesia's Lion Air and Thailand's Orient Thai - also budget carriers.

"We are eyeing new joint ventures in Singapore, Indonesia and India and the funds will help us fly to new regional routes," he told AFP .

AirAsia has successfully brought low-cost flights to intra-Malaysian travel despite initial forecasts of gloom by aviation analysts, and it has now embarked on a programme to spread its wings regionally.

In its first regional venture, the carrier is to begin daily flights to Phuket, one of Thailand's premier tourist destinations, from December 8.

The cost of a one-way ticket to Phuket will start from RM89.99, 60 percent lower than existing fares charged by other carriers.

Kamarudin said AirAsia took delivery of two Boeing 737-300 aircraft in October, increasing its fleet to nine, and it aimed to have 22 aircraft by late 2004.

By end 2004, AirAsia expected to be flying to all domestic destinations in Malaysia, five new destinations in Thailand and have roped in another joint venture, he said.

AirAsia has tied up with Thai telecommunications giant Shin Corp to form AirAsia Aviation, the first no-frills carrier offering services in Thailand.

Shin Corp, controlled by Thai Prime Minister Thaksin Shinawatra's family, will hold a 51 percent stake in AirAsia Aviation, which will have an initial share capital of 400 million baht (US$10 million).

AirAsia Aviation is from January to commence services with three Boeing 737-300s on routes linking Bangkok, Chaing Mai, Phuket, Hat Yai, Kon Kaen and Nakornrachasima.

Kamarudin said AirAsia was hopeful that it would be able to fly to Singapore and negotiations were progressing.

"We hope to start the Singapore service. We are also looking into a possible joint venture in Indonesia and India. Every country in the region is on our radar. The question is cost and if it will meet our operation model," he said.

Possible stake

AirAsia's chief executive Tony Fernandes said last month the Singapore plan was still at "an embryonic stage" and would be similar to the Thai joint venture.

He said there had been talks with the Singapore government's investment arm, Temasek Holdings, which holds a substantial stake in Singapore Airlines, for a possible stake in AirAsia.

The Malaysian budget carrier's bid to launch direct flights between the city-state and Kuala Lumpur has hit several snags including Changi airport's refusal to lower its landing charges for AirAsia.

AirAsia carried two million passengers within 18 months of operation and targets 3.2 million in 2003.

Asked if AirAsia was expanding too fast, Kamarudin said: "I don't think so. But we are expanding faster than our initial business plan since we have got things moving in motion. We feel there is a need to head that way." - AFP