AirAsia Berhad has achieved its goal of selling its leasing arm, clinching a $1.18 billion deal that includes the sale of up to 182 Airbus jets.
The Malaysian low-cost airline announced Thursday the sale by its subsidiary Asia Aviation Capital Ltd to leasing entities and investors who will then lease most of the jets back to AirAsia and its affiliates.
The jets will go to entities belonging to BBAM Limited Partnership, a major investment manager in commercial aircraft. AirAsia has been aiming to sell its aircraft leasing operations for the past year as part of a strategy to offload "non-core assets and businesses," according to the group's CEO Tony Fernandes.
The BBAM leasing and investing entities — FLY Leasing Limited, Incline B Aviation Limited Partnership, and Nomura Babock and Brown — will acquire a portfolio of 84 Airbus jets and 14 engines, most of which will be leased back to AirAsia. FLY and Incline have also agreed "to acquire 48 aircraft to be delivered to AirAsia Berhad and an option to acquire a further 50 aircraft to be delivered," over the next three years, according to an AirAsia press release.
As FLY Leasing acquires this major new aircraft portfolio, AirAsia will receive $50 million in FLY shares, giving it a 10.2 percent ownership of FLY. It will also invest $50 million into a fund belonging to Incline earmarked for global aviation investments.
AirAsia, which has a fleet of more than 200 jets and flies to more than 165 destinations across 25 countries, is Airbus's second-largest customer and is expected to expand as Asia's middle-class grows.
Both Airbus and its competitor Boeing have orders for their commercial aircraft, particularly the single-aisle planes favored by low-cost carriers, slated for the next seven years or more, making them appealing to long-term investors.
"When we bought these planes, our gearing was high and some people could not see why we wanted to own these assets," Fernandes said. "This deal shows it was the right strategy as we have something of value to dispose in return for cash and an equity relationship in two great companies, while removing residual risks."