Despite AirAsia chief’s rebuttal, analysts less sanguine over budget carrier’s financial plight
analysis Asia
Despite AirAsia chief’s rebuttal, analysts less sanguine over budget carrier’s financial plight
As the Malaysian budget carrier reportedly seeks fresh financing, analysts are scrutinising whether its financial strains reflect a temporary industry shock or deeper vulnerabilities.
KUALA LUMPUR: AirAsia co-founder Tony Fernandes has insisted that the airline does not need government help but analysts say numbers tell a different story - which is that its “financial situation is still in a dire state” and issues remain.
They say the spotlight on the Malaysian budget carrier’s plight has also put the viability of its low-cost model under scrutiny after years of restructuring, rapid expansion and accumulated financial pressures.
And if conditions continue to worsen despite Fernandes’ assurances, a bigger question remains: How far should the Malaysian government go to protect an airline with an outsized role in the country’s aviation sector?
AirAsia’s financial plight came into the spotlight after reports that Malaysian authorities had been assessing its financial position and preparing for different scenarios, according to news reports.
A Reuters report published on Sep 16, citing two sources familiar with discussions, said that the government had allegedly spoken to rival Malaysia Airlines and Batik Air about whether they could absorb AirAsia’s domestic market share if necessary.
Both carriers indicated they could expand organically to take on routes and passengers rather than acquire AirAsia’s entire business, Reuters said.
Batik Air’s chief executive Chandran Rama Muthy also told the Bernama state news agency that it was “able to bring aircraft in quickly to absorb or help with the domestic market demand if required”.
But Fernandes, in addressing the media during an online briefing from Bangkok on Friday (Sep 18), pushed back against reports that AirAsia was in serious trouble.
“We have always had crises and come out stronger,” he said, also insisting that the carrier did not “need rescuing or bailouts”.
He instead pointed to strong passenger demand and expectations that earnings would improve in the second half of the year, while expressing confidence that the airline would secure US$1 billion (RM4 billion) in financing by January.
“We are very confident of getting (it),” Fernandes said, noting that the company has been “negotiating with many banks” for the best deal.
Even challenges such as soaring jet fuel costs were “far, far” less severe than those faced during the COVID pandemic, he added.
Economist Mohd Harridon Mohamed Suffian from Universiti Kuala Lumpur’s Malaysian Institute of Aviation Technology said that despite the latest remarks by Fernandes, one has to be “vigilant (about) the economic and financial signs and indicators to fully gauge AirAsia’s financial stature”.
“It is also imperative to gauge AirAsia’s debt,” he added, pointing to a call by the National Union of Flight Attendants Malaysia (Nufam) for the airline not to lay off staff amid its financial strains,” Harridon added.
AIRASIA’S FLIGHT AND PLIGHT
The airline is no stranger to financial difficulty.
Established in 1993, it began flying three years later as a conventional full-service airline - but struggled financially, accumulating around RM40 million in debt.
In 2001, Tune Air, led by Fernandes and Malaysian entrepreneur Kamarudin Meranun, acquired the debt-laden airline for a token RM1 while also taking on its liabilities and subsequently transforming it into a low-cost carrier that would become one of Southeast Asia’s biggest aviation success stories.
Today it operates from hubs in Malaysia, Thailand, Indonesia, Cambodia and the Philippines.
Its fleet of 239 planes also serves more than 150 destinations across over 20 countries, mainly in Asia and Australia.
But its rapid growth has been punctuated by periods of financial stress.
The most severe came during the pandemic, which pushed parts of the AirAsia group into severe financial distress - with both AirAsia X and Capital A, then the parent of its short-haul airlines, falling under Bursa Malaysia’s PN17 classification in 2021 and 2022 respectively.
PN17 companies must undertake a financial recovery plan to maintain their listing on the Malaysian stock exchange.
Years of restructuring followed, culminating in the consolidation of its airline businesses under AirAsia X, now known as AirAsia Group Berhad - earlier this year.
Capital A, which retained the group’s non-airline businesses, exited PN17 in May.
In a statement released on Sep 2, AirAsia shared that its planned fundraising exercises, comprising up to US$1 billion in international debt markets and RM700 million in local credit facilities, were “primarily targeted at debt restructuring, refinancing and balance sheet consolidation, rather than purely funding operational shortfalls”.
For Shukor Yusof, founder and principal analyst at Endau Analytics, the latest concerns over AirAsia therefore do not come entirely out of the blue.
As of June 30, 2026, the airline had RM954mil in cash against RM18.4bil in current liabilities - while borrowings stood at RM3.13 billion and lease liabilities at RM13.3 billion.
“It is not surprising to many industry watchers as it is a publicly-listed company and the figures are out there for all to see and assess,” he told CNA.
“Anyone can see their balance sheet is weak and the jet fuel situation remains highly volatile,” he said, adding that the airline “needs an urgent infusion of funds, ideally more than what is being raised”.
Its recent woes also come amid a surge in fuel prices amid the conflict in the Middle East - a problem that has affected airlines around the world.
The International Air Transport Association (IATA) said in June that rising fuel costs and war-related disruptions had significantly worsened the outlook for the industry, with budget carriers to be among the hardest hit.
Shukor also pointed to the bankruptcy restructuring of Latvia’s flag carr