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AirAsia Sells 25 Aircraft to Castlelake

2019-01-14 11:32 Monday


Malaysian budget carrier AirAsia Group recently announced a contract with U.S. private investment firm Castlelake LP, which agreed to sell a portfolio of 25 planes to the company for $768 million. AirAsia's fleet size stood at 127 planes now. The whole transaction is expected to be completed by the second quarter of next year.

Aircraft

Castlelake, a global fund focused on alternative investments, has been stepping up its layout in aviation assets. In June 2017, it raised $1billion from investors including family offices, sovereign wealth funds, endowments and pension funds.

AirAsia Group will lease back those 25 planes from Castlelake years later. Meanwhile, Castlelake will also purchase four new aircraft that will be delivered to AirAsia in 2019. AirAsia insider reveals that some of the proceeds from the sale will be used to pay down debt, which will allow AirAsia to preserve its existing funds for future business and provide a platform to expand its route network without the capital-intensive ownership of aircraft.

AirAsia, Asia's biggest cheap airline, has been seeking to transform itself into an asset-light, digitally focused firm. The contract registered a critical move to its transforming ambition.

"The transaction is subject to the approval of the group's shareholders and other relevant customary closing conditions, and is expected to be completed in the second quarter of 2019," AirAsia Group said in a statement.

"As we move towards becoming a travel technology company, the disposal of these aircraft will not only unlock significant value but also bring us closer to our goal of being a truly digital company," said AirAsia Group CEO Tony Fernandes.

The deal may usher in another round of asset disposal after the company completed a sale-and-leaseback deal involving 84 aircraft and 14 engines worth nearly $1.2 billion. AirAsia Group has also disposed its 25% stake in travel portal Expedia Group for $60 million earlier this year.

"This transaction is part of AirAsia's ongoing transformation into something more than an airline," Fernandes said. "In a few years, our digital strategy will be understood."

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