AirAsia's Fernandes says travel demand remains strong

AirAsia's co-founder, Tony Fernandes, stated on Friday that the travel crisis caused by soaring jet fuel costs is significantly less severe than the challenges faced during the Covid-19 pandemic. Speaking at a media briefing, Fernandes reassured investors about the airline's financial health, highlighting strong liquidity and efficient cash management.

He emphasized that the current crisis was driven by geopolitical tensions and higher fuel prices, while travel demand remains robust. The briefing followed a Reuters report, citing unnamed sources, that Malaysia's government had asked Malaysia Airlines and Batik Air to consider absorbing AirAsia's domestic market share as part of scenario planning while monitoring the airline's financial health.

As of June 30, AirAsia's current liabilities were 18.4 billion ringgit ($4.52 billion), with cash and bank balances amounting to 954 million ringgit. Fernandes acknowledged that the second quarter was the toughest period for the airline, which controls about 60% of Malaysia's domestic market, and forecast improving conditions as the company adjusts fares to account for higher fuel costs.

The airline's share price dropped 21% after the Reuters report, and Malaysian financial markets were closed on Wednesday for a public holiday. AirAsia's stock fell 2% on Friday after reaching as low as 5% earlier, with the company having lost over 70% of its value this year. Despite the challenges, Fernandes noted that AirAsia's large market share in Malaysia would make its financial difficulties a significant concern for the government, and the group maintains 100 planes in the country, with strong bookings expected for the fourth quarter in Indonesia, the Philippines, and Thailand.

For the second quarter ended June 30, AirAsia reported a net loss of 831 million ringgit, driven by rising jet fuel costs and foreign-exchange losses amounting to 331 million ringgit.