Three people familiar with the matter told reporters that Tony Fernandes, who co-founded AirAsia, held talks with finance ministry officials a fortnight ago over possible state backing for the budget carrier, which operates as the largest of its kind across Southeast Asia. Unnamed sources indicated that the discussions stem from government unease over the fiscal position of the nation's biggest home-based airline, a situation tied to a run-up in jet fuel costs.
According to a pair of people briefed on the matter, discussions had centred on a possible government pledge to support AirAsia's effort to raise capital, with that backing tied to a set of conditions the airline would be required to meet — details of which remained unresolved at that point. Details of the proposed terms were not immediately available.
In an interview broadcast on Friday, Fernandes — acting in his capacity as co-founder and adviser to the airline — disclosed to a news channel that he had personally arranged and attended a series of meetings with representatives from Malaysia's finance and transport ministries during the week of 28 September. Fernandes stated that talks with government representatives centred on operational costs — airport fees and fuel among them — and that no request for financial support had been made or received on either side, with the airline's funding position not raised by officials at any point during those meetings.
Fernandes placed his confidence in AirAsia's capacity to navigate the present situation without drawing on government assistance at the same level the airline had managed throughout the pandemic period — rating that likelihood at 100 per cent. Fernandes indicated that AirAsia stood ready to accept assistance from any government across its operating markets — among them Malaysia, Thailand, and Indonesia — adding that no offer of that kind would be turned down.
Taking that path would amount to a mistake, he stated. His remarks included a prior appeal to the government for assistance in arranging financing through domestic Malaysian banks — an avenue he viewed as preferable to overseas borrowing — and he noted that this request for locally denominated facilities carrying more favourable rates and conditions remained active.
Delegates from Alton Aviation Consultancy — a firm that earlier media coverage identified as having been brought in by the finance ministry to evaluate the funding requirements of loss-making AirAsia — were also present at the gathering, according to two individuals familiar with the discussions. No statement was forthcoming from the finance ministry. Neither the transport ministry nor Alton provided any reply when approached for comment.
Jet fuel expenses climbed 66% between the first and second quarters, with the average barrel price reaching $183 — a cost pressure that has weighed on the carrier's finances. A broadcast aired the month prior had put both Malaysia Airlines and Batik Air at the centre of that conversation, with the government said to have approached each carrier about absorbing AirAsia's domestic network should the need arise — an internal planning exercise running alongside regulatory oversight of the airline's finances — and it was against that backdrop that the subsequent gathering took place.
AirAsia shares retreated by as much as 21% in the next trading session, pulling the stock back to price levels not recorded in approximately four years. Two unnamed sources indicated that officials had grown attentive to AirAsia's balance-sheet vulnerabilities, given the downstream exposure those vulnerabilities carry for air routes, the tourism sector, and entities tied to the state — among them airport operator Malaysia Airports Holdings Berhad.
Fernandes has stated that roughly three in five domestic flights within Malaysia operate under AirAsia's banner, with a workforce of 26,000 people tied to the carrier. Sitting at the close of the June 30 reporting period, the airline held cash and bank deposits totalling 954 million ringgit (equivalent to $233.65 million), while short-term obligations on its books reached 18.4 billion ringgit.
That internal address to staff — held by Fernandes at AirAsia's headquarters on 28 September, where he conveyed to employees that the airline would work through its present challenges — came before the sessions with government officials, according to two people with knowledge of the matter. Fernandes told staff the airline industry as a whole was navigating a period of difficulty, adding that the carrier had weathered comparable pressures on multiple occasions in the past.
At a press briefing on 18 September, the airline's leadership stated that no talks with the government had taken place, describing the carrier's liquidity position as robust and asserting that no form of financial rescue was being sought; separately, AirAsia posted a net loss of 831 million ringgit (approximately $204 million) for the three-month period ending 30 June, with elevated jet fuel costs and foreign-exchange losses of 331 million ringgit weighing on the result, while an earlier remark from the chief executive drew a contrast between the current environment and the COVID-19 period, noting that aircraft operations remained possible this time around.
Funds totalling as much as $1 billion are being sought from overseas debt markets, with an additional 700 million ringgit pursued through domestic credit lines, chiefly to retire obligations already on the books. Roughly three-quarters of the company's share value has been wiped out over the course of this calendar year.
On Friday, Fernandes indicated that the $1 billion capital raise was on track to close somewhere between December and February, with roughly half the proceeds earmarked to retire costlier debt and the remainder allocated toward working capital and settling what he described as "extended liabilities"; he added that AirAsia had built its budget around a prolonged period of elevated oil prices and had not yet observed any softening in travel demand, noting that load factors were holding above 80% even as jet fuel climbed to as much as $200 per barrel, though he acknowledged that pricing beyond that threshold remained untested and that, at some stage, sufficiently high fuel costs would begin to erode passenger volumes. The exchange rate stood at 4.0830 ringgit to the US dollar, while the precise threshold in question had not been made clear.
