Malaysia talks to Batik Air, Malaysia Airlines to absorb AirAsia domestic routes

Malaysia is discussing with Malaysia Airlines and Batik Air the possibility of absorbing AirAsia's domestic routes, according to sources familiar with the matter. This comes as Malaysia's government monitors the financial health of AirAsia, the region's largest low-cost airline. The talks aim to address AirAsia's significant debt of at least 500 million ringgit (US$123.6 million) owed to Malaysia Airports Holdings Berhad (MAHB) for services like landing and parking fees.

The airline is facing soaring jet fuel costs due to the US-Israeli war on Iran, which surged 66% in the second quarter to an average of US$183 a barrel. If Malaysia Airlines and Batik Air were to take over AirAsia's operations, they would need to assume its aircraft leases as well, as operating without aircraft would be challenging.

The government has explored various options, including providing support for AirAsia to raise fresh capital from external investors. However, the exact nature of any potential assistance remains unclear. AirAsia currently holds about 40% of Malaysia's aviation market and 60% of domestic flying, making its financial troubles a significant concern for the government.

Despite these challenges, AirAsia remains focused on business continuity and stable operations across its markets.