Public Investment Fund (PIF), Saudi Arabia's sovereign wealth fund, is preparing to invest approximately USD100 million in AirAsia (AK, Kuala Lumpur International), according to a Bloomberg News report. The low-cost carrier is trying to raise around about MYR1 billion ringgit (USD226 million), and the Saudi investment would cover 44% of that sum.

PIF holds circa USD930 billion in assets and is under the control of Crown Prince Mohammed bin Salman. Its aviation-related investments include Saudi lessor AviLease, start-up passenger carrier Riyadh Air (RXI, Riyadh), and a stake in London Heathrow. Sources told the news agency that talks with AirAsia were well-advanced but still to be finalised.

AirAsia's growth aspirations and that of its related companies, including parent Capital A and sibling long-haul operator AirAsia X (D7, Kuala Lumpur International) took a hit during the pandemic, and Asia's sluggish aviation recovery and a large aircraft orderbook at Airbus put further pressure on the operator.

AirAsia's fundraising is designed to help shore up its balance sheet and restart its pre-pandemic growth momentum. Among other things, it will better position the airline to pay for ordered aircraft. According to the most recent Airbus data, AirAsia's orderbook stands at 356 A321neo family-type aircraft.

Saudi Arabia's interest is reportedly linked to that orderbook. The country's Vision 2030 involves a massive expansion of the aviation sector which, among other things, includes start-ups such as Riyadh Air. Aircraft orders have been placed but the long delivery timelines are a problem. If Saudi Arabia invests in AirAsia, its state-owned airlines can take aircraft from AirAsia's order.

In a separate deal recently, Riyadh Air took a portion of AirAsia's orderbook at Airbus. The deal hastens the delivery of aircraft to it and relieves financial pressure on AirAsia.

AirAsia's fundraising efforts may result in Capital A and associated entities divesting as much as 15% of the airline. Aside from the Saudi talks, the airline is also talking to Singaporean and Japanese investors.