Malaysia-based regional budget carrier AirAsia said today it has gained full regulatory approval for its initial public offering (IPO) and will issue 700.51 million shares at 10 sen each.

"We believe that a listing status will allow us to grow and strengthen our position as a leading low-fare, no-frills carrier in Southeast Asia," AirAsia Bhd group chief executive Tony Fernandes said, adding that the airline was already "well positioned" amid mounting competition.

AirAsia began operating in January 2002 with two aircraft, which have since grown to 22 operating over 100 domestic and international flights daily out of three hubs - Kuala Lumpur and Johor Bahru in Malaysia as well as Bangkok, where its subsidiary Thai AirAsia is based.

Company sources earlier said AirAsia, the first budget carrier to be listed in Southeast Asia, expects to raise around one billion ringgit from the IPO, which would make it the biggest share sale so far this year in Malaysia.

The company statement said 23.35 million shares had been allocated for employees, directors and business associates of AirAsia, 116.75 million shares for the public and 560.4 million shares for Malaysian and foreign institutional investors in a private placement.

Analysts expect an IPO price of around RM1.50 per share, The Edge Financial Daily said, adding that the IPO was expected to take place on Nov 22, with proceeds going into new aircraft and expansion of regional routes.

Rival ventures

The head of research at a local brokerage told AFP that AirAsia has a strong brand and that its earnings prospects appear to be "very good" but some fund managers might be concerned about the valuation and timing of the IPO.

"Sentiment is very bearish in the aviation stocks due to high fuel prices. We've seen how Malaysia Airlines, Easyjet and Ryanair stocks have tumbled more than 10 percent over the past few months. Timing is everything," he said.

"Investors with high-risk appetite would go for the IPO," he added.

Fernandes said AirAsia had achieved profitability despite difficulties faced by the aviation industry such as terrorism, rising fuel prices and the Severe Acute Respiratory Syndrome (SARS) epidemic last year.

"We are pleased and excited about the planned listing as we had wanted to reward our employees who have been instrumental in our success," he said.

AirAsia has spawned rival ventures in the region, notably in neighbouring Singapore, which is building a dedicated low-cost air terminal to cater for the booming market.

The latest player is Jetstar Asia, a joint operation between Australia's Qantas, the Singapore government's Temasek Holdings and two prominent local businessmen, which will start flying in December to destinations within five hours from the city-state.

Tiger Airways, backed by Singapore Airlines, and Valuair are now operating out of Singapore.