Saudi Arabia’s Public Investment Fund (PIF) is set to invest approximately $100 million in AirAsia, a move that deepens the Gulf nation’s economic and strategic ties with Southeast Asia, a key hub for tourism. The deal will see the PIF play a central role in a broader fundraising effort by AirAsia, which is seeking to raise around 1 billion ringgit (approximately $226 million), according to sources familiar with the negotiations.
PIF’s involvement in the AirAsia fundraising is expected to be the largest single contribution, although discussions are still ongoing with other potential investors from Singapore and Japan. The deal, which could be finalized in the coming weeks, is still uncertain, and sources caution that it may yet fall through.
AirAsia, which has faced financial difficulties during the pandemic, is seeking to revitalize its growth after years of losses. The low-cost airline group is offering up to a 15% stake to outside investors, valuing the company at $2 billion. This investment comes at a pivotal time as Capital A Bhd, AirAsia’s controlling shareholder, is nearing approval for a restructuring that would merge its aviation assets with its sister company, AirAsia X Bhd.
Capital A’s shares saw a slight uptick on Friday, rising 1.8% in Kuala Lumpur, while AirAsia X’s stock surged 6.5%.
Strategic Aircraft Deals
A major attraction for investors is AirAsia’s large fleet of over 350 narrowbody aircraft on order with Airbus. Currently, AirAsia operates a fleet of 225 Airbus narrowbody planes. Saudi-backed Riyadh Air, the startup airline partially owned by the PIF, has recently acquired a portion of these Airbus delivery slots. The swap has allowed AirAsia’s owner, Tony Fernandes, to extend his financing commitments and defer short-term obligations.
Riyadh Air, set to launch later this year, was originally preparing to purchase 100 Boeing 737 jets but decided to take over AirAsia’s Airbus slots to bolster its fleet. Riyadh Air, with only one technical spare, will benefit from the additional aircraft as it prepares for its inaugural flights.
The PIF already has a significant presence in the aviation sector, owning an aircraft leasing company, a helicopter unit, and space and defense assets. It also holds a 15% stake in London’s Heathrow Airport. The fund, which manages approximately $930 billion in assets, plays a key role in Crown Prince Mohammed bin Salman’s broader strategy to diversify Saudi Arabia’s economy away from oil dependency.
Saudi Arabia’s Vision for Tourism and Global Investments
Crown Prince Mohammed bin Salman, who chairs the PIF, is focused on transforming Saudi Arabia into a global travel hub, with Neom—a $1.5 trillion city being built on the Red Sea coast—serving as a central pillar of the kingdom’s vision for the future. In addition to its investments in aviation, the PIF has channeled billions into global sports sectors, including soccer, golf, auto racing, and tennis, further enhancing the kingdom’s international footprint.
AirAsia’s parent company, Capital A, has struggled financially since the pandemic, and was even classified as financially distressed by the Malaysian stock exchange. The airline had to cancel plans for a U.S. listing via a SPAC deal last year, which would have raised more than $1 billion. However, AirAsia is focused on securing new investors before it places another order for around 100 regional jets, eyeing either the Airbus A220 or the Embraer E2.
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