Monday, July 23, 2007

Virgin Group to take stake in Fly Asian Xpress

Richard Branson's Virgin Group will sign an agreement next month to take a 20 percent stake in Fly Asian Xpress Sdn. Bhd., the new long-haul budget airline owned by the main shareholders of Malaysia's AirAsia, executives familiar with the plan said Monday.

Branson's Virgin Group Ltd. is scheduled to sign an agreement Aug. 10 to take the stake in FAX for about 24 million ringgit (US$6.9 million; euro5.0 million), pending approval from the Malaysia's Foreign Investment Committee, which oversees all foreign investments, one of the executives told Dow Jones Newswires.

AirAsia, the region's most prominent low-cost carrier, will exercise an option to buy just under 20 percent of FAX as well, the executive said on condition of anonymity because of the sensitive nature of the negotiations.

FAX is presently 100 percent owned by AirAsia's founders, including its chief executive Tony Fernandes and deputy chief executive Kamarudin Meranun.

The fundraising will allow FAX to partially finance its operational expenses and buy new aircraft, another executive said.

On completion of the stake sale, FAX will have a paid-up capital of 120 million ringgit (US$34 million; euro25 million) and will mull an option to sell more shares to further strengthen its balance sheet, the executive said.

FAX, which plans to launch low-cost flights from Malaysia to India, China and Europe later this year, recently agreed to buy 15 wide-body A330-300 aircraft from Airbus, with the first new A330 to be delivered in the third-quarter of next year.

The airline has a 30-year license to use the AirAsia brand and facilities.

The airline is seen as a test of whether the highly successful low-cost airline model can be profitable on long-haul flights, which are dominated by full-service airlines.

Source : STAR
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