The AirAsia brand is featured in the exhibition hall at the Bali International Airshow 2024, held at Ngurah Rai International Airport in Kuta, Bali, Indonesia, on September 19, 2024. The September 18-21 event is being staged on the airport’s southern apron to promote Indonesia’s aviation and defense industries. (Photo by Johanes P. Christo/NurPhoto via Getty Images)
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AirAsia remains financially “sustainable” despite recent media reports raising concerns about its health, co-founder Tony Fernandes said, adding that the airline is planning to expand even as fuel costs rise and geopolitical uncertainty persists.
Reuters reported earlier this week, citing people familiar with the matter, that Malaysia’s government had asked Malaysia Airlines and Batik Air whether they could absorb AirAsia’s domestic market share as part of contingency planning. Authorities have been monitoring the carrier’s financial position, with discussions intensifying in recent weeks, according to the report.
“We’re OK. We’re sustainable,” Fernandes said at a media briefing on Friday, rejecting the idea that AirAsia required a government bailout. “There is no chance of non-sustainability. Zero chance.”
Fernandes said AirAsia had reworked its cost and revenue structure to manage higher fuel prices, which rose sharply after the airline sold many tickets at fares based on lower costs. The company reported a 58% year-on-year increase in fuel expenses as average jet fuel prices reached $183 per barrel.
The airline’s planned fundraising is focused on refinancing, Fernandes said. “It’s $1 billion, not $3 billion. We do not need $3 billion.”
Earlier this month, the Malaysia-based budget carrier said it planned to raise up to $1 billion through international debt markets, alongside 700 million ringgit ($171.5 million) in local credit facilities. The funds are intended mainly for debt restructuring, refinancing and balance-sheet consolidation rather than covering operational losses.
Fernandes also dismissed the notion that rival airlines could easily replace AirAsia’s operations, highlighting the roughly 100 aircraft the carrier operates in Malaysia.
“You can’t just step in,” he said, arguing that AirAsia’s cost structure, network and brand would be difficult for competitors to replicate.
Fernandes also said AirAsia would unveil a “pretty exciting announcement” about its growth plans and strategy with Airbus within the next month. He described the airline’s relationship with the aircraft manufacturer as “fantastic.”
Next moves
AirAsia is increasing its use of artificial intelligence and has already achieved fuel savings of about 3% through the technology, Fernandes said. The carrier plans to introduce additional customer-facing AI features over the next three months.
Responding to questions from CNBC, Fernandes said AirAsia would continue entering markets where it can generate profits and offer better value than competing airlines.
He said AirAsia’s partnership with Turkey’s Pegasus Airlines could provide a blueprint for future expansion, adding that several European low-cost carriers had expressed interest in possible partnerships.
AirAsia reduced capacity by 11% during the quarter and suspended long-haul routes that were underperforming. It also scaled back fleet allocations in the Philippines and Indonesia. The airline expects to restore capacity to pre-war levels in the fourth quarter as demand for year-end travel strengthens.
