AirAsia co-founder meets Malaysian officials amid funding concerns
AirAsia co-founder Tony Fernandes met Malaysian government officials in late September to discuss the airline’s financial position, as rising jet fuel costs raise concerns about the carrier’s financial health, according to three people familiar with the matter.
Two of the people said discussions included the possibility of the government backing AirAsia’s fundraising efforts, subject to conditions that remain under consideration. Reuters could not immediately establish the details of the proposed conditions.
Fernandes confirmed meeting officials from Malaysia’s finance and transport ministries during the week beginning September 28.
However, he said the discussions focused on aviation costs, including airport charges and fuel, rather than financial assistance.
He denied seeking government financial aid and said he was confident AirAsia could manage the situation without state support.
However, he added that the airline would consider assistance if offered by governments in countries where it operates, including Malaysia, Thailand and Indonesia.
Representatives from Alton Aviation Consultancy, hired by Malaysia’s finance ministry to assess AirAsia’s funding needs, also attended the meeting, according to two people familiar with the discussions.
The finance ministry declined to comment, while the transport ministry and Alton did not respond to requests for comment.
Rising Fuel Costs and Financial Losses
AirAsia’s jet fuel costs rose 66% in the second quarter from the previous quarter to an average of $183 a barrel, amid the US-Israeli war on Iran.
The airline reported a net loss of 831 million ringgit for the second quarter ended June 30, partly due to higher fuel costs and foreign-exchange losses of 331 million ringgit.
AirAsia accounts for about 60% of Malaysia’s domestic aviation market and employs 26,000 people, according to Fernandes.
As of June 30, it had cash and bank balances of 954 million ringgit ($233.65 million) and current liabilities of 18.4 billion ringgit.
The Malaysian government is concerned that financial difficulties at the airline could affect domestic air connectivity, tourism and related businesses, including state-linked airport operator Malaysia Airports Holdings Berhad, two people familiar with the matter said.
Airline Seeks $1 Billion in Funding
AirAsia is seeking up to $1 billion from international debt markets, alongside 700 million ringgit in local credit facilities, primarily to refinance existing debt.
Fernandes said he expected the $1 billion fundraising to be completed between December and February.
Around half of the funds would be used to refinance expensive loans, with the remainder allocated to working capital and outstanding liabilities.
He said the airline was budgeting for 12 months of high oil prices but had not yet seen demand weaken, with seat occupancy remaining above 80% despite jet fuel prices reaching $200 a barrel.
Fernandes warned that further increases could eventually reduce travel demand, although he said it was unclear at what price level that would happen.