AirAsia X locks up more funds

AirAsia X, the low-cost, long-haul airline that is due to start operations on Friday, has secured $75m in additional financing from investors in Japan and the Middle East.

The Malaysian airline, the most ambitious project yet developed to take the low-cost airline business model into long-haul services, is launching its first route between Kuala Lumpur and Australia’s Gold Coast. China’s Huang Zhou is expected to become the second destination within a couple of months followed by the UK late next year.

AirAsia X is being launched by Tony Fernandes, founder and chief executive of AirAsia, the leading Asian low-cost carrier, which started flying at the end of 2001.

The experimental long-haul carrier will use the same AirAsia brand, but it has been established as an independent airline with a separate management and investor base.

During the development phase it has been owned 60 per cent by Mr Fernandes and his founding AirAsia partner, 20 per cent by Air-Asia through convertible preference shares and 20 per cent by Sir Richard Branson’s Virgin group.

In a further round of fundraising Orix, the Japanese financial services group, and Manama, the Bahrain private equity group, are taking stakes of 10 per cent each in AirAsia X for a total of $75m, giving the new airline a valuation of $375m.

AirAsia X placed orders in the summer for 15 Airbus A330-300s to be delivered over five years starting from September 2008. It is starting the operation with a small number of leased aircraft.

The pioneering initiative, which will be watched by the global carriers fearful of the threat such start-ups could pose, is aiming at offering fares 50 to 60 per cent below the lowest offered by competitors.

The venture is also being followed by Boeing and Airbus, the two jetmakers, and AirAsia X is expected to open negotiations shortly on a big order for next generation aircraft in a contest between the Airbus A350 and the Boeing 787 Dreamliner. The jets in the 787 Dreamliner family are too small for AirAsia X’s needs, but the airline is pushing Boeing to press ahead with the development of the 787-10, a larger variant.