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AirAsia Berhad ("AirAsia" or "the Company") is pleased to announce that further to the purchase agreement dated 13 June 2005 with CFM International, Inc. ("CFM") for 129 firm orders of CFM 56-5B/P engines (the "Engine Purchase Agreement") with options to acquire up to a further 86 engines, the Company has now exercised its options to purchase 86 engines with options to acquire up to a further 65 engines. In addition, the Company has signed an OnPoint Solution^SM engine service arrangement with General Electric ("GE") (the "Engine Service Agreement") for the firm 86 engine ordered.

DETAILS OF THE ENGINE PURCHASE AGREEMENT

The Engine Purchase Agreement for the firm order of 86 engines is valued at approximately US$500 million (based at list price).

The Engine Service Agreement is worth approximately US$1.1 billion. Under the agreement, GE will provide maintenance, overhaul and repair for the 86 firm engine order for a period of 20-years.

RATIONALE FOR INCREASE OF FIRM ORDER

The additional 86 engines will be installed to the Company’s Airbus A320-200 aircraft on order. This will meet the Company’s rapid expansion plan and to replace the Boeing 737-300 that will be returned to its lessor upon expiry of its leases. This extension of order secures AirAsia’s fleet requirement up till 2012 and lock-in the benefits of the original agreement.

FUNDING FOR THE ENGINE PURCHASE

The funding for the Engine Purchase will be part of the funding required for the Aircraft Acquisition. The Company is currently considering various sources of funding, including but not limited to export credit guaranteed borrowings, commercial bank borrowings and sale and leaseback transactions.

FINANCIAL EFFECTS OF THE AIRCRAFT ACQUISITION

As previously mentioned in the announcement dated 20 July 2006, the Aircraft Acquisition is expected to contribute positively for the current financial year ending 30 June 2007 and to the future consolidated earnings of AirAsia.

The Aircraft Acquisition is not expected to have a material and adverse effect on the net tangible assets, issued and paid-up share capital of AirAsia.

This transaction is a transaction in the ordinary course of business of AirAsia.

DIRECTORS AND SUBSTANTIAL SHAREHOLDERS' INTERESTS

None of the directors and/or major shareholders of the Company and persons connected to them, insofar as the existing directors and major shareholders are able to ascertain and are aware, has any interest, direct or indirect, in the Engine Purchase Agreement.

This announcement is dated 18 December 2006.

Announcement Info