AirAsia Group has announced it is planning to sell its Asia Aviation Capital leasing unit to a group of entities managed by BBAM.

The Asian budget carrier conglomerate said in a filing to the Bursa Malaysia on March 1 that the disposal was valued at USD1.185 billion on the back of an enterprise value of USD2.8462 million.

Under the terms of the agreements, FLY Leasing (FLY), Incline B Aviation Limited Partnership (Incline), and Nomura Babcock & Brown (NBB) will acquire a portfolio of 84 aircraft and 14 engines of which 79 aircraft and 14 engines will be leased back to AirAsia (AK, Kuala Lumpur Int'l) and its affiliates.

FLY and Incline have also entered into agreements to acquire 48 aircraft to be delivered to AirAsia Berhad and an option to acquire a further 50 aircraft to be delivered. As part of the disposal consideration, AirAsia Group will also receive non-cash considerations comprised of USD50 million in FLY American Depositary Shares (ADSs), resulting in AirAsia Group owning approximately 10.2% of FLY.

“When we bought these planes, our gearing was high and some people could not see why we wanted to own these assets," AirAsia Group CEO Tony Fernandes said. "This deal shows it was the right strategy as we have something of value to dispose [of] in return for cash and an equity relationship in two great companies while removing residual risks."

AirAsia Group will also commit USD50 million into Incline Parallel Funds, which will invest, alongside the Incline Aviation Master Fund, in global aviation investments. As a result of the disposal, AirAsia Group says it is expected to recognise a gain on sale of approximately MYR967.1 million ringgits (USD246.06 million).