Malaysia talks to rival airlines as it monitors AirAsia’s financial health: Sources

Malaysia’s government has sought input from Malaysia Airlines and Batik Air regarding the potential absorption of AirAsia’s domestic market share, as part of their monitoring of AirAsia’s financial health, according to sources. The discussions have intensified in recent weeks due to growing concerns over AirAsia’s financial pressures.

AirAsia has faced soaring jet fuel costs, which surged by 66% in the second quarter of the year to an average of $183 a barrel due to the US-Israeli war on Iran. The government is considering various options, including providing support for AirAsia to raise fresh capital from external investors, though the specifics remain unclear.

Both Malaysia Airlines and Batik Air have said they would only take over AirAsia’s operations if they could also assume the aircraft leases, as absorbing the routes and passenger volumes without the aircraft would be challenging. AirAsia commands about 40% of Malaysia’s overall aviation market and 60% of domestic flying, making its financial challenges significant for the government.

Farouk Kamal, deputy group chief executive of AirAsia Group, stated that the airline does not comment on operational or financial speculation or unannounced corporate arrangements. AirAsia owes the Malaysia Airports Holdings Berhad (MAHB) at least RM500 million in services like landing and parking fees. The airport operator has extended repayment, but the exact financial picture of AirAsia remains undisclosed.