The company plans to use proceeds from the bonds to pay for acquisition of aircraft. In 2003, Penerbangan Malaysia agreed to buy six Airbus 380 jetliners for delivery in 2007.

The parent company owns most of the planes operated by Malaysian Airline, in which it has a 69 percent stake, following a restructuring at the struggling national carrier.

The fund raising will be the biggest by a government-linked company since July, when the Cagamas national mortgage agency raised 2.05 billion ringgit (HK$4.22 billion) in the world's first sale of Islamic securities backed by residential loans.

"We're still working on it and we'll make an announcement when the terms are finalized," said Penerbangan Malaysia corporate services vice president Shahril Mokhtar.

Banking sources said further details on the bond may be available today.

A syndicate banker said the bond could come in two tranches, in five- year, 10-year, or 30-year maturities.

There is likely to be a government guarantee on the bond, which will increase demand, the banker said.

ECM Libra analyst Bryan Lim said in Kuala Lumpur the bond could help the national carrier to expand its operations in the region.

"There's room for expansion in the region to India and China, so this is where the funds will go to," Lim said.

In 2003, Penerbangan Malaysia abandoned a US$500 million global bond offer because it was not a well- known name on the international debt market.

Penerbangan Malaysia is wholly owned by government investment agency Khazanah Nasional.

Its latest bond plan comes shortly after the airline reported its worst quarterly results in four years, with a 280.7 million ringgit loss in the financial first quarter.

The airline spent 1.1 billion ringgit on fuel during the quarter, 58 percent higher than the 706 million ringgit a year ago.

It has since revamped top management and unveiled a five-year turnaround plan.

The airline's shares shed 1.3 percent to 3.16 ringgit Tuesday. DOW JONES NEWSWIRES, REUTERS