Jakarta. Malaysian budget airline group AirAsia announced on Thursday (01/03) that it will sell its aircraft leasing unit to San Francisco-based BBAM Aircraft and Leasing Management for $1.18 billion.
AirAsia, through its subsidiary Asia Aviation Capital, agreed to sell 84 aircraft and 14 engines to a BBAM-affiliate comprising New York-listed FLY Leasing, Incline B Aviation and Japanese investment firm Nomura Babcock and Brown.
Meanwhile, the 14 engines and 79 of the aircraft will still be leased back to AirAsia, which currently has 200 aircraft that serve 130 destinations in the Asia-Pacific region.
FLY Leasing and Incline also plan to acquire 98 aircraft from AirAsia – 48 of which will be delivered to AirAsia first – over the next three years, the company said in a statement.
"This agreement showed that this is the right strategy for our business as we have various valuable assets to divest, which in return can give us profit and stakes in two companies, and also minimizing our business risks," AirAsia Group president director Tony Fernandes said.
The divestment is the part of carrier's strategy to focus on its core business, while also decreasing its financial leverage. AirAsia expects to complete the transaction by the third quarter of this year, it said in a filing to the Malaysia Stock Exchange on Thursday.
"This is the perfect outcome to a strategy that we started in 2004 and I’m thrilled at the execution of our long-term vision. We have now divested of most of our non-core assets – assets that are no longer in use – and we are thrilled to be embarking on our new digital strategy, which will build a valuable group of assets," Fernandes said.
AirAsia will receive about $1.085 billion in cash, a 10.2 percent stake in FLY Leasing worth $50 million, and a $50 million investment in an aviation fund created by Incline as part of the sale of its aircraft leasing unit.
"We are happy to start this new long-term partnership with the BBAM and FLY team. In many ways, we share similar values, which makes the partnership special. We hope that this cooperation will be long-established," Fernandes said.
Credit Suisse, BNP Paribas, and RHB are acting as joint financial advisers for AirAsia.
BBAM is one of the world's largest commercial aircraft leasing companies, providing more than 200 airlines in more than 50 countries with fleet and financial solutions. BBAM currently owns more than 400 aircraft.
Nomura Babcock and Brown is an investment arm of global financial holding company Nomura Group. The company is focused on leasing aircraft and heavy equipment.