IPO ... AirasiaX

Is the long haul low cost model for airlines works?

Such concerns are not unfounded, especially many long haul low cost carriers have had their wings clipped since the 2008/2009 global financial crisis.

New entrant Scoot – a subsidiary of SIA may give Airasia X a run for its money.

In reality this business is highly capex and the gestation period before it reaches a stage where it generates sufficient cash is long.

It is worth nothing here that Airasia X has had a few rounds of capital injection since its birth. The first was when Virgin subscribed for a 20% stake in Airasia X, Then it was the private placement in 2008, which brought in Manara Consortium and Orix Corp. The third was a rights issue involving most of the shareholders. Following the private placement and rights issue, Virgin’s 20% stake was diluted to 10%.

In March 2012, Airasia X proposed to raise US$200 million via a sukuk, but it has postponed the plan for at least another 12 months.

However, Airasia had hinted that it may exit Airasia X via the IPO although, the former later stated that the exit was one of the options that would require further deliberation by its board.

For now (July 2012), the more pressing question is will the other shareholders of Airasia X hold on their stakes or will they also be looking to depart?