Malaysia's AirAsia to Expand to Its Fleet to 500 Planes by 2027

By Yantoultra Ngui Features Dow Jones Newswires

KUALA LUMPUR, Malaysia--Malaysia's AirAsia Bhd. (5099.KU) is gearing up to expand to 500 aircraft by 2027, from 106 as of end-June, as the largest budget airline in Asia by passenger volume looks to widen its footprint in the region, its group chief executive officer said on Tuesday.

Continue Reading Below

"I'm confident that we can reach this target or even exceed it, especially as we set up our new associate airlines in Vietnam and China in the coming years," Tony Fernandes, who is also AirAsia's co-founder, said in a news statement.

The expansion entails adding 30 new aircraft every year for the next ten years, he said.

Mr. Fernandes, who has led the company together with co-founder Kamarudin Meranun from a two-plane operation in 2002 to become a billion-dollar airline, said AirAsia plans to add a further 23 planes to the group fleet in the second half of this year. The aircraft expansion will be funded through a combination of finance and operating leases.

The announcement of the plan came after the airline posted its weakest quarterly earnings in nearly two years, as second-quarter net profit was weighed down mainly by a deferred tax charge and higher operating expenses.

Net profit for the April-June period fell 73% to 92.5 million ringgit ($21.7 million) from MYR342.1 million a year ago, according to a local stock-exchange filing Tuesday.

Continue Reading Below

Quarterly revenue however surged to its highest ever, climbing 47% to MYR2.38 billion ($557.6 million) in the second quarter, from MYR1.62 billion the previous year.

For the full year, AirAsia said it was optimistic about stronger results, citing strong demand and stable fuel prices and foreign-exchange rates. It said it expects to achieve an average load factor--passenger traffic as a percentage of available seats--of 88% in the third quarter.

Meanwhile, Mr. Fernandes on Tuesday said AirAsia intends to continue to look at deals to monetize its non-core assets and distribute a special dividend every two years. It announced on Friday the sale of its entire 50% stake in a training center, Asia Aviation Centre of Excellence, to its partner CAE International Holding Ltd. for US$100 million.

"We are currently in final negotiations and will materialize the sale of Asia Aviation Capital, our leasing arm before the close of the year," he said.

AirAsia is also working toward the listing of Indonesia AirAsia and Philippines AirAsia, Mr. Fernandes said.

Shares of AirAsia were 0.6% higher at MYR3.33 before suspension on Tuesday afternoon. Shares of the airline have climbed 45% year-to-date.

Write to Yantoultra Ngui at Yantoultra.Ngui@wsj.com

(END) Dow Jones Newswires

August 29, 2017 06:30 ET (10:30 GMT)