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AirAsia IPO hopes to bring balance sheet clarity

Asia's biggest low-cost airline AirAsia Bhd plans an initial public offering of a holding company that will tally all of its ASEAN operations and entities under a Hong Kong listing for the Malaysia-based carrier, reflecting an expanded regional footprint to entice investors.

"It's (about) creating a single economic vehicle that allows analysts and investors to see the group as whole," CEO Tony Fernandes told CNBC's "Squawk Box," adding that the move will not affect flight operations, though back office services will be centralized.

The financial thinking behind the deal is to broaden AirAsia's investor base and give the company "an easier set of accounts to look at," though he did not provide figures for the share sale targets on amounts to be offered, or pricing.

The new entity in Hong Kong, ASEAN Holding Co. will particularly raise its profile in the growing North Asian market, he said. But the company will retain financial links in Southeast Asia under a structure that will also see shares listed in Indonesia and the Philippines by the second quarter of next year before launching the consolidated operations, Fernandes said, without providing details.

AirAsia will also list its flight crew training center in Kuala Lumpur, following the company's third-quarter results. Fernandes has previously said he wanted to combine the airline's operations in home base Malaysia with those in Indonesia, Thailand and the Philippines.

The Southeast Asian operations have recovered since Indonesia AirAsia Flight 8501 crashed into the Java Sea in December 2014, killing all passengers and crew.

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AirAsia is also looking to divest some of its non-core businesses. It already has its aircraft leasing arm on the market and aims to complete the sale in early 2017 following bids that are due in December, Fernandes said, adding that he valued the unit at about $1 billion.

Reuters reported in August that AirAsia was looking to sell a majority stake in its Asia Aviation Capital leasing operation, or possibly the entire business, which the carrier values at 4.1 billion ringgit ($922.38 million). Last month, AirAsia said it had received good interest in the sale.

The comments from Fernandes follow third quarter results released on Thursday that showed the company swung to a profit of 53.9 million ringgit ($79.62 million) from a net loss of 405.7 million ringgit a year ago on aircraft, as operating lease income rose and lower oil prices cut costs. On Tuesday, the group's long-haul unit, AirAsia X Bhd swung to a net profit of 11.03 million ringgit. Revenue was higher at 982.4 million ringgit.

The results were underpinned by a load factor of 87 percent, a measure of how full planes are, up 6 percentage points from the same period last year, with expectations for a continued 89 percent level in Malaysia in the fourth quarter and more than 80 percent for its operations in Thailand, Indonesia and the Philippines.

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