Malaysia talks to rival airlines as it monitors AirAsia’s financial health, sources say

Malaysia’s government is exploring options with rival airlines Malaysia Airlines and Batik Air to take over AirAsia’s domestic market share, as the airline faces financial difficulties, sources say. The government, including the finance ministry and state-linked airport operator Malaysia Airports Holdings Berhad, is conducting scenario planning to monitor AirAsia’s financial health.

AirAsia reported a net loss of RM831 million for the second quarter ended June 30, primarily due to soaring jet fuel costs and heavy foreign-exchange losses, Reuters reported. Discussions between the government and the two airlines have intensified recently, with discussions involving the finance ministry and Malaysia Airports Holdings Berhad.

Malaysia Airlines and Batik Air have stated they would only take over AirAsia’s operations if they could also assume its aircraft leases, making it difficult to absorb the routes without the aircraft. AirAsia commands about 40% of Malaysia’s aviation market and 60% of domestic flying, making its financial challenges significant for the government.

AirAsia had current liabilities of RM18.4 billion as of June 30 and owes Malaysia Airports Holdings at least RM500 million, according to sources. The airline is seeking up to US$3 billion in fresh capital, including external debt and local credit facilities, to address its financial position.