AirAsia's Fernandes says travel demand remains strong, current crisis 'far' less severe than Covid

Tony Fernandes, co-founder of AirAsia, stated on Friday that the airline's financial struggles due to high jet fuel costs are significantly less severe than those experienced during the Covid-19 pandemic. Addressing investors at a media briefing, Fernandes highlighted AirAsia's strong liquidity and cash management capabilities, emphasizing that the current crisis is primarily driven by geopolitical tensions and rising fuel prices. He noted that travel demand remains robust despite the challenges.

Fernandes pointed out that AirAsia's current liabilities stood at 18.4 billion ringgit ($4.52 billion) as of June 30, compared to cash and bank balances of 954 million ringgit. He described the second quarter as the toughest period for the airline, which holds about 60% of Malaysia's domestic market. However, Fernandes forecasted improving conditions as the company adjusts fares to reflect higher fuel costs.

The airline faced soaring jet fuel costs due to the US-Israeli war on Iran, which surged by 66% in the second quarter to an average of $183 a barrel. AirAsia shares dropped 21% on Thursday following the Reuters report, with Malaysian financial markets closed on Wednesday for a public holiday. The stock continued to fall, closing 2% lower on Friday and having lost over 70% of its value this year.

Fernandes assured that one cannot replace AirAsia's 100 planes in Malaysia overnight, underscoring the airline's significant market share and its importance to the government. He reported an 80% load factor in the third quarter, with strong bookings anticipated for the fourth quarter. Fernandes expressed optimism about operations in Indonesia, the Philippines, and Thailand, while acknowledging the significant financial challenges the group faces, including a net loss of 831 million ringgit for the second quarter, exacerbated by rising jet fuel costs and foreign-exchange losses of 331 million ringgit.