AirAsia co-founder Tony Fernandes on Friday affirmed the low-cost airline’s capability to withstand surging jet fuel prices, emphasizing the carrier’s strong liquidity position amid rising investor concerns and declining share prices.
Speaking at a media briefing in Bangkok, Fernandes outlined that AirAsia expected to raise over $1 billion, mainly to refinance existing debt, by December or January. He stressed that the financial challenges posed by the current fuel cost increases were manageable compared to the impact of the COVID-19 pandemic when the airline was grounded. “Covid was far, far worse than what we are dealing with now,” Fernandes said. “We couldn’t fly then, but we can fly now and our demand is very strong.”
The announcement follows reports that the Malaysian government had engaged Malaysia Airlines and Batik Air to explore whether they could absorb AirAsia’s domestic market share as part of broader scenario planning, reflecting concerns about the airline’s financial health. This comes amid a global rise in jet fuel prices linked to tensions in Iran, which has contributed to financial distress for other carriers, including the collapse of Spirit Airlines in the U.S. and Latvia’s airBaltic filing for bankruptcy protection.
As of June 30, AirAsia held current liabilities of 18.4 billion ringgit ($4.52 billion) against cash and bank balances of 954 million ringgit. Fernandes acknowledged that the second quarter was among the toughest for the airline, which controls roughly 60% of Malaysia’s domestic flights, but projected improved conditions as the company adjusts ticket prices to offset increased fuel costs. The airline’s fuel expenses rose 66% in the second quarter from the previous period, averaging $183 per barrel, with no hedging in place.
AirAsia’s shares have fallen about 24% since reports of government contingency planning emerged on Wednesday, reaching their lowest since December 2022 and declining more than 70% in value year-to-date.
Malaysia’s finance ministry has reportedly enlisted Alton Aviation Consultancy to evaluate the airline’s funding requirements amid deliberations over potential government support, given AirAsia’s significance to the local economy. Fernandes, however, denied that any government assistance had been sought or received in AirAsia’s 25-year history and said no discussions about bailouts were underway. “We do not need rescue, bailout, whatever,” he said.
Fernandes highlighted that AirAsia’s market position, comprising 100 aircraft, a distinctive cost structure, brand and network, could not be replaced overnight. The carrier is currently negotiating financing options, including a bond transaction with a major global bank and a $1 billion investment offer from a Middle Eastern investor, though it is awaiting improved terms.
The airline reported an 80% load factor in the third quarter and anticipates continued strong bookings in the fourth quarter. Fernandes expressed optimism regarding operations in regional markets such as Indonesia, the Philippines and Thailand.
To reduce costs, AirAsia has been aggressively restructuring by cutting underperforming routes, returning 25 older aircraft to lessors, and renegotiating vendor contracts. The upcoming refinancing efforts aim to lower borrowing costs rather than raise new capital, Fernandes said.