Asia's top budget carrier AirAsia is in talks with local and foreign lenders to finance the acquisition of 60 new A320 Airbus aircraft worth US$3.7 billion, a senior official said today.

"Yes, we are in talks with local and foreign banks. The purchase of 60 aircraft is a major acquisition for AirAsia," Kamarudin Meranum, AirAsia's executive director, told AFP .

Kamarudin said Royal Bank of Scotland, Citigroup Inc., HSBC and Deutsche Bank were among the foreign banks in the discussions.

"We have not mandated any institution as yet but talks have been going on since we inked the sales and purchase agreement with Airbus in March," he said.

Kamarudin said other fund raising options being considering were Islamic financial instruments and a bond issue, adding that "a decison would be made by year-end."

Kamarudin declined to reveal the amount the company planned to borrow, saying it depended on the "proposals from the banks."

AirAsia has ordered 60 A320 Airbus with an option for another 40 aircraft which will completely replace its current fleet of 28 single-aisle, 148-seat Boeing 737-300s.

Delivery of the first A320 will begin late this year and continue through until 2011, the company said.

Resisting fuel surcharges

On fuel surcharges, Kamarudin said AirAsia would try to put it them off as long as it could manage its costs.

"We will resist fuel surcharges. It is a balancing act between profit and serving the interest of our passengers," he said.

In March, AirAsia said its three months to December net profit rose to RM44.3 million from RM10.5 million in the previous quarter on sales up 55 percent to 178.6 million ringgit.

Launched as a budget carrier in December 2001 with just two aircraft, AirAsia has defied the sceptics to become a significant regional player, with its business model now imitated by startled national carriers along with a host of new low-cost entrants.