Contents :

INTRODUCTION

Further to Bursa’s letter dated 8th January 2007 (Ref: NM-070108-41013), AirAsia Berhad (“AirAsia” or the “Company”) wishes to provide the following clarification as well as provide additional information pertaining to the Memorandum of Understanding (“the MOU”) entered into between the Company and Fly Asian Xpress Sdn Bhd (“FAX”) on 5th January 2007, specifically relating to the offer for participation in the capital of FAX.

FAX, a private limited company incorporated in Malaysia, is a commercial airliner currently serving domestic routes within the states of Sabah and Sarawak.

FAX has received the approval from the Malaysian Ministry of Transport on 4th January 2007 to undertake long haul air services to a number of international destinations. In this regard, FAX has decided to model its international operations as a low cost, long haul air service.


PROPOSED INVESTMENT IN FAX

Under the MOU, AirAsia has been given the right to invest in up to twenty percent (20%) stake in FAX by participating in the share capital and/or subscribing for loan stock or other instrument(s) convertible, at the option of AirAsia, into ordinary shares of FAX at par value.

AirAsia shall further have an option, exercisable within five (5) years, to acquire additional shares in FAX to bring its shareholding to a maximum of thirty percent (30%) at the then prevailing market valuation.

NEGOTIATION PERIOD UNDER THE MOU

The MOU shall terminate automatically on the date which is six (6) months after the date of the signing of the MOU or such other date as the Parties may agree in writing. Either Party may terminate the MOU and its rights and obligations thereunder by giving one (1) month’s written notice to the other.


FURTHER INFORMATION

(A) AirAsia currently has no shareholding, whether directly or indirectly, in FAX;

(B) Since there are common directors and major shareholders (per MBLR definition) in AirAsia and FAX, any transaction entered into by AirAsia or its subsidiaries which involves the interest, direct or indirect, of FAX is a related party transaction;

(C) The Board of Directors of AirAsia has received the proposal and presentations from FAX and its adviser. The Board has considered the merits of the proposal and had appointed an independent committee, comprising 3 of its members and senior management of the Company, to deliberate on the proposal in further detail. Based on the recommendations made, the Board had agreed principally to the proposal. This has culminated in the drawing up and execution of the MOU;

(D) The offer to acquire an initial participatory interest of up to 20% interest in FAX at par or nominal value (through the issuance of new equity shares or convertible debt instruments) presents AirAsia with an opportunity for a cheap entry to reap the future economic benefits from a successful low cost, long haul air service to be operated by FAX under the AirAsia brand name. This benefit is over and above the licensing fee payable by FAX for the use of the AirAsia brand;

(E) The option to acquire further interest in FAX was requested to address any potential dilution in the initial shareholding in the event FAX were to issue additional shares as part of its capital raising exercise within a five year time frame. The option also allows AirAsia to further increase its participation in FAX to a maximum of 30%. The acquisition of this additional interest however will be priced at the same level payable by a new investor or investors at the time of the offering made by FAX; and

(F) AirAsia and FAX will endeavour in good faith to negotiate and enter into definitive written Agreement(s), subject to the board approvals of the respective Parties being obtained, if required, relating to the matters within the premise of the MOU, and conditional upon the approval of AirAsia’s members in general meeting in due course, if necessary as required under the MBLR.

This announcement is dated 9 January 2007.

Query Letter Contents :

We refer to the above news article appearing in The Edge, page 1, on Monday, 8
January 2007, a copy of which is enclosed for your reference.
In particular, we would like to draw your attention to the underlined
sentences, which are reproduced as follows:-
"FAX has offered... the option to buy another 10% at a later date."
"...the board has agreed in principle to take up the offer and will be seeking
shareholders' approval of the decision."
In accordance with the Securities Exchange's Corporate Disclosure Policy, you
are requested to furnish the Securities Exchange with an announcement for
public release confirming or denying the above article and in particular the
underlined sentences after due and diligent enquiry with all the directors,
major shareholders and all such persons reasonably familiar with the matter
about which the disclosure is to be made in this respect. In the event you deny
the above sentences or any other part of the above reported article, you are
required to set forth facts sufficient to clarify any misleading aspects of the
same. In the event you confirm the above sentences or any other part of the
above reported article, you are required to set forth facts sufficient to
support the same.





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AirAsia Berhad
ARTICLE ENTITLED: "Fly Asian Xpress game plan"
__________________________________________________

Please furnish the Securities Exchange with your reply within one (1) market
day from the date hereof.

Yours faithfully


TAN YEW ENG
Head, Issuers
Listing Division, Group Regulations
TYE/NMA
c.c:- Encik Chung Tin Fah, Securities Commission (via fax)