AirAsia Sells Aircraft Leasing Operations To BBAM For $1.18 bn

Asia Aviation Capital Ltd, an arm of AirAsia Berhad, the world’s leading low-cost carrier services with an extensive network of more than 130 destinations across Asia Pacific, has now singed an agreement with the San Francisco-headquartered BBAM Limited Partnership (BBAM), one of the world’s largest dedicated managers of investments in commercial jet aircraft, to sell its aircraft leasing operations. The total disposal consideration is learnt to be $1.18 billion on an an enterprise valuation of $2.85 billion (total business).

Top company officials said that as part of the disposal consideration, AirAsia Berhad will also receive non-cash considerations comprising of $50 million in FLY American Depositary Shares (ADSs), resulting in AirAsia Berhad owning approximately 10.2 per cent of FLY. AirAsia Berhad will also commit $50 million into Incline Parallel Funds, which will invest alongside the Incline Aviation Master Fund in global aviation investments. As a result of the disposal, AirAsia Berhad is expected to recognise a gain on sale of nearly RM 967.1 million.

As per the agreement, FLY Leasing Limited (FLY), Incline B Aviation Limited Partnership (Incline) and Nomura Babcock and Brown (NBB) will acquire a portfolio of 84 aircraft and 14 engines of which as many as 79 aircraft and 14 engines will eventually be leased back to AirAsia and its affiliates. FLY and Incline have also entered into agreements to acquire 48 aircraft to be delivered to AirAsia Berhad and an option to acquire a further 50 aircraft to be delivered.

“The latest move (the sale deed) is quite in line with our announced strategy of disposing non-core assets and businesses, an undertaking which we have successfully executed over the last six months. It all began with disposing off our training centre, ground handling unit and now we have repeated the same strategy with our leasing unit. We have thus unveiled the true value of AirAsia,” said Tony Fernandes, CEO, AirAsia Group.

He added, “When we had bought these planes, our gearing was high and some people could not see why we wanted to own these assets. The latest sale deal proves beyond doubt that buying of these planes at that point of time had been the right strategy. This is because, we now have something of value to dispose in return for cash and an equity relationship in two great companies, while removing residual risks. This is a perfect outcome to a strategy we started in 2004 and I’m excited over the execution of our long-term vision. As anyone can see now, we have disposed of most of our physical non-core assets. We are now excited over kicking off our new digital strategy, which we hope, will build a very valuable group of assets.”

BBAM CEO Steve Zissis, on his parts, said, “Tony alongwith his team have built an incredible business at AirAsia. We feel fortunate to have this opportunity of building a long-term partnership with an organization of this caliber.”