By Reuters and published by CNA
Hong Kong: AirAsia co-founder Tony Fernandes said on Friday (Sep. 18) that the low-cost carrier’s challenges from soaring jet fuel costs were “far, far” less severe than those it faced during the Covid-19 pandemic period.
Speaking at a media briefing, he also said strong demand for air travel continued to support the business.
The media briefing came two days after Reuters reported, citing sources, that Malaysia’s government had asked Malaysia Airlines and Batik Air whether they could absorb AirAsia’s domestic market share.
The sources said it was part of what they described as scenario planning while authorities monitor the financial health of Southeast Asia’s largest low-cost carrier.
Fernandes told reporters the second quarter marked the toughest period for the airline and he forecast improving conditions as AirAsia adjusts fares to reflect higher fuel costs.
The airline has been hit by soaring jet fuel costs stemming from the US-Israeli war on Iran that surged 66 percent in the second quarter from the prior quarter to an average of US$183 a barrel.
Other options that have been discussed include the Malaysian government providing some form of endorsement to bolster the airline’s plan to raise fresh capital from external investors, though the exact nature of any potential support remains unclear, Reuters reported this month.
Reuters was unable to independently establish details about AirAsia’s financial picture.
Malaysia Airlines and Batik Air told the government they would only take over AirAsia’s operations on a large scale if they could also assume its aircraft leases, one of the people said, as absorbing its routes and passenger volumes without the aircraft would be far more difficult.
Malaysia Airlines and Batik Air have both expressed to the government their willingness to expand organically to absorb AirAsia’s routes and passengers rather than acquire its whole business, the people said.
AirAsia has said it commands about 40 percent of Malaysia’s overall aviation market and 60 percent of domestic flying, making its financial challenges a significant concern for the government, the people interviewed by Reuters said.
Farouk Kamal, deputy group CEO of AirAsia Group, said in a statement that the airline does not comment on operational or financial speculation or unannounced corporate arrangements.
“All material updates regarding our business and fleet strategy are disclosed transparently through official exchange filings and corporate announcements at the appropriate time,” he told Reuters.
“We also wish to reiterate that AirAsia remains focused on maintaining business continuity and stable operations across all its markets and we continue to see strong underlying demand across our network. We are also working closely with our stakeholders to manage our financial and operational requirements.”
Malaysia Airports Holdings said it regularly engaged with all airline partners as part of normal network and route development, including on “potential capacity and route opportunities where there are gaps in the market or unmet demand.” It declined to comment on AirAsia’s financial outlook.
Malaysia’s finance ministry, Batik Air and Malaysia Airlines declined to comment.
The airport operator has already granted the carrier repayment extensions, two of them said. They all declined to be identified because the discussions were private.
Malaysia Airports Holdings declined to comment on specific queries from Reuters, saying it did not discuss commercial arrangements with airline partners as a matter of practice. AirAsia did not address queries on whether it owed money to Malaysia Airports Holdings but said it had a strong and constructive relationship with key partners, including Malaysia Airports Holdings Chief Airports Officer Bryan Thompson and his team.
AirAsia said this month it was advancing discussions with financial institutions, targeting up to US$1 billion from international debt markets plus RM700 million in local credit facilities, primarily to restructure its debt.
Two of the people with knowledge of the matter estimated the airline required at least US$3 billion of fresh capital to address its financial position.
In response, AirAsia said its financing targets were sufficient to meet its requirements. The airline had cash and bank balances of RM954 million as of June 30.
AirAsia reported a net loss of RM831 million for the second quarter ended June 30, hit by rising jet fuel costs and heavy foreign-exchange losses of RM331 million.
The carrier has been restructuring aggressively, cutting underperforming routes, returning 25 older aircraft to lessors and renegotiating contracts with vendors to reduce costs.
Reuters reported this month that the finance ministry had hired Alton Aviation Consultancy to assess AirAsia’s funding needs as it weighs whether to provide support given the airline’s role as a major employer and provider of affordable air connectivity across the region.
The finance ministry declined to comment, while Alton did not respond to a request for comment.
CAPTIONS:
Top and Front Page: AirAsia planes stand on the tarmac at Kuala Lumpur International Airport Terminal 2 in Sepang, Malaysia, on Jan. 21, 2026. File photos: Reuters/Hasnoor Hussain and published by CNA
Insert: Tony Fernandes, the CEO of AirAsia’s parent company, Capital A, attends an interview with Reuters in Sepang, Malaysia, on Feb. 26, 2024. File photo: Reuters/Hasnoor Hussain and published by CNA
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