Budget carrier AirAsia is on track to launch an initial public offering (IPO) to fund its ambitious expansion plan and will make an announcement about it next week, a top official said today.

"Some negotiations (are) taking place and we will make an announcement next Friday," Tony Fernandes, AirAsia's chief executive officer told AFP .

Fernandes said the announcement was related to identifying the banks to underwrite the IPO and the timing of the issue.

Local newspaper reports said the profit-making carrier would appoint one local bank and one foreign bank for the IPO and it would be issued in September.

Fleet expansion

The banks are likely to be Commerce International Merchant Bankers Bhd and Credit Suisse First Boston, an analyst close to the deal said.

AirAsia would invest RM228 million as part of a plan to increase its fleet to 30 by year's end from the current 14, the Financial Daily reported Thursday.

Asked about the valuation of the IPO, he said: "We will look at it at a later stage."

An analyst with a local brokerage said AirAsia's rapid expansion to regional destinations was turning up the heat on larger carriers.

"It is obvious, they are turning up the heat," he told AFP on condition of anonymity.

The analyst said it was vital AirAsia expands quickly to enjoy the economics of scale and boost revenue.

"If they don't, they may find difficulties to pay off their debts," he said.

The analyst said since AirAsia had a healthy cash flow, the IPO would enjoy favourable response.

"It is clear, the IPO is to help the carrier fund its capital expenditure - fleet expansion," he said. "It is fast and cheapest way to raise funds."

Fernandes attributed the company's run-away success to good staff, hardwork and costing.

Humble beginning

The two-year-old Malaysian company has become Southeast Asia's version of European budget carrier Ryanair.

From its humble beginning with just two Boeing 737-300 jets in 2001 plying Malaysia's domestic routes, AirAsia has expanded at a furious pace under the helm of Fernandes, an accountant by training who previously had no experience of running an airline.

It now has a fleet of 14 Boeing 737-300 aircraft and aims to increase that to 30 before December.

It already flies to Singapore, Thailand and would spread its wings to Indonesia in April.

AirAsia would commence daily flights from Kuala Lumpur to Bandung on April 12, to Surabaya on April 15 and from southern Johor state, neighbouring Singapore to Jakarta on April 10.

Fernandes said the airline targeted at least 70 percent load factor.

Besides the three destinations, the airline also planned to fly to Denpasar, Bali from Kuala Lumpur this year.

On Thailand, Fernandes said the carrier enjoyed 85 percent load factor since it was launched last month.