AirAsia in talks with Malaysian government over potential funding support

Malaysia's co-founder Tony Fernandes met with finance ministry officials in recent weeks to discuss potential government support for the country's largest low-cost airline, AirAsia, according to three people familiar with the matter. The talks come amid growing concerns about AirAsia's financial health following a spike in jet fuel prices.

The discussions centered on the possibility of the government backing AirAsia's fundraising efforts, provided the airline agreed to proposed conditions, though the specifics of these conditions remain under discussion. Fernandes, speaking for the airline, told Reuters he had met with officials from Malaysia's finance and transport ministries during the week of September 28 at his request, but emphasized that no discussions on financial assistance had taken place.

He stated that AirAsia would not turn away help if offered, but reiterated that the company is confident it can navigate the current situation without state assistance. The financing challenges faced by AirAsia are attributed to soaring jet fuel costs, which have surged 66% in the second quarter due to geopolitical tensions, such as the US-Israeli war on Iran.

The government has become increasingly concerned about AirAsia's financial position, as the carrier controls about 60% of Malaysia's domestic aviation market and employs 26,000 people.