Malaysia's pioneer budget carrier AirAsia may have its initial public offering as early as October as it has secured preliminary government approval, a source said, while analysts predict the offering will attract investors despite high oil prices.

A source familiar with the exercise told AFP that the Malaysian-based company was pushing for October for its initial public offering (IPO) as part of a plan to fund its ambitious expansion programme.

"Since it has secured preliminary approval, the IPO can happen as early as October or by the latest November," the source said on condition of anonymity Saturday.

The source said the Foreign Investment Committee had approved the IPO and the airline was now awaiting final approval from the Securities Commission and its management board.

AirAsia in March said it had appointed Credit Suisse First Boston and RHB Sakura Merchant Merchant Bankers as the bookrunners for the IPO.

"The IPO strengthens our balance sheet, further cuts down existing low costs and accelerates our growth plans," Kamarudin Meranun, AirAsia's executive director said in March.

Proven track record

Suhaimi Saidi, economist with AmSecurities said that since oil prices are stabilising, the IPO would be well received, adding that AirAsia was the first budget carrier in the region to list.

"It is all about timing. Oil prices have stabilised. The timing is right. Investors will be bullish," he said.

Suhaimi said another important factor that would attract investors was the able and proven track record of the AirAsia management team under chief executive officer Tony Fernandes.

"I am upbeat the IPO will get good response because of the proven management track record," he said.

Another analyst said since AirAsia had hedged itself against rising oil prices, a short-term surge in prices would not effect its bottom line.

"Furthermore it is unclear if high oil prices will be sustainable," he said on condition of anonymity.

Fernandes recently said: "Even if oil prices hit 60 dollars per barrel, we can still grow and make profits."

On Friday the price of benchmark Brent North Sea crude oil for delivery in October tumbled 2.02 dollars to 40.20 dollars per barrel in closing trading in London.

Furious expansion

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.

It flies to 16 destinations in Malaysia and mounts regional flights to neighbouring Singapore, Thailand, Indonesia and Macau and hopes to land in China by year-end.

AirAsia expects to handle about 7.5 million people by 2005 from six million in 2004.

The airline plans to expand its fleet to 26 next year from the current 18. It now operates only Boeing 737-300s.

In June, the carrier announced that it would acquire up to 80 new aircraft over the next four to eight years to cater for regional expansion.