Loss-making Malaysia Airlines on Tuesday said it planned to raise up to 2.5 billion ringgit ($800 million) in Islamic bonds as part of an ambitious plan to escape financial difficulties.
In February the flag carrier said it lost 2.52 billion ringgit last year largely due to soaring fuel costs, admitting it was "in crisis".
The new funding plan comes after budget carrier AirAsia and Malaysia Airlines scraped their controversial share swap deal early this month.
Last August fast-growing flyer AirAsia agreed to acquire 20.5 percent of Malaysia Airlines under a strategic tie-up aimed at turning around the struggling national carrier.
"We anticipate to drawdown the first tranche of 1.0 billion ringgit of the proposed sukuk sometime in June 2012 once all regulatory approvals are cleared, and for the remaining amount of the programme later," it said in a statement.
Malaysia is the world's biggest market for Islamic bonds.
Islamic banking fuses principles of Islamic law and modern banking. Islamic funds are banned from investing in companies associated with tobacco, alcohol or gambling.
The state-owned airline said it had secured a 1.0 billion ringgit bridging loan from a local commercial bank "to ensure our working capital cash balances remain adequate" until the expected drawdown of the first tranche of the proposed sukuk.
Malaysia Airlines also said that it plans to lease six new Airbus A380s and two new Airbus A330 with a total capital value of 5.3 billion ringgit.
"We are indeed hopeful and optimistic that we can secure the proposed elements of our funding plan as soon as possible.
"With the above funding plan, MAS (Malaysia Airlines) is able to proceed with all upcoming aircraft deliveries which is paramount to its recovery plan," it added.
For the quarter ended March 31, Malaysia Airlines reported its fifth consecutive loss amounting to 171.8 million ringgit, compared with a loss of 242.3 million a year earlier.