Tony Fernandes, the co-founder and CEO of AirAsia, reportedly met with officials from Malaysia’s finance ministry two weeks ago to discuss potential government support for Southeast Asia’s largest low-cost airline.
If the reports about the talks, as reported by Reuters citing sources, come true, then the development would reflect growing government concerns about the financial health of the country’s largest domestic carrier following a spike in jet fuel prices, amid the ongoing Iran war.
Discussions were mostly centered on the prospect of the Anwar Ibrahim government backing AirAsia’s fundraising efforts provided the airline agreed to proposed conditions laid down by the administration.
The conditions, however, have remained under discussion.
Fernandes later confirmed the news, telling Reuters in an exclusive interview that he had met with officials from Malaysia’s finance and transport ministries during the week starting September 28 at his request.
He stated that the discussions focused on aviation-related costs, such as airport charges and fuel, rather than financial assistance.
“Obviously, like every airline in the world, we are telling the government that the industry is in a tough period,” he said.
“There have been no discussions on financial assistance with the government,” Fernandes added.
“I meet with government officials all the time…just because I meet them doesn’t mean we’re talking about financial assistance,” he continued.
According to Fernandes, he and the Ibrahim government did not approach each other for help, nor did the government raise concerns about AirAsia’s funding or offer support.
Fernandes said he was “100%” confident AirAsia could navigate the situation without state assistance, as it had during the COVID pandemic.
However, he also said AirAsia would not turn away help if offered from any government in the countries where it operates, including Malaysia, Thailand, and Indonesia.
“We will never say no to it. We would be foolish to do so,” he said.
Fernandes had previously asked the Ibrahim government to help the airline secure loans from Malaysian banks rather than borrowing overseas and still sought such support, as he preferred local-currency loans with better interest rates and terms.
Representatives from Alton Aviation Consultancy, reportedly hired by the Malaysian finance ministry to assess loss-making AirAsia’s funding needs, also attended the meeting.
AirAsia, just like its global industry peers, has been hit by soaring jet fuel costs that surged 66% in Q2 from the prior quarter to an average of USD 183 a barrel, stemming mainly from the Iran war.
In September, reports emerged about the Ibrahim government asking Malaysia Airlines and Batik Air whether they could absorb AirAsia’s domestic market share as part of scenario planning while authorities continued to monitor the carrier’s financial health.
“The government has grown increasingly concerned about AirAsia’s financial position because of the knock-on effects its weakness would have on air connectivity, tourism, and related businesses such as state-linked airport operator Malaysia Airports Holdings Berhad,” said the sources.
AirAsia, as of October, controls about 60% of Malaysia’s domestic aviation market, apart from employing 26,000 people.
Going by Fernandes’ statement, the airline had cash and bank balances of 954 million ringgit (USD 233.65 million) and current liabilities of 18.4 billion ringgit as of June 30.
Fernandes also held a company town hall on September 28 at AirAsia’s headquarters, where he told staff that the airline would overcome its current difficulties.
“It is a tough time for all airlines. We’ve been through many tough times before. We will come out of it stronger,” he reportedly said.
“The big difference between this and COVID is we can actually fly,” he observed further.
Fernandes has been maintaining a bold face in front of the media. On September 18, he told the press persons that AirAsia had “strong liquidity” and “we do not need rescue, bailout, or whatever.”
The Southeast Asian major reported a net loss of 831 million ringgit (USD 204 million) for the second quarter ended June 30, hit by higher jet fuel costs and foreign-exchange losses of 331 million ringgit.
The airline is now targeting up to USD 1 billion from international debt markets plus 700 million ringgit in local credit facilities, primarily to refinance existing debt.
AirAsia has been witnessing a freefall into the stock market, losing more than 70% of its value so far this year.
Fernandes expects the USD 1 billion fundraising to be completed between December and February, with half used to refinance expensive loans and the rest for working capital and paying off “extended liabilities.”
AirAsia, according to the CEO, has already budgeted for 12 months of high oil prices and has yet to see demand weaken, with the percentage of seats filled above 80%, even though jet fuel prices have risen as high as USD 200 a barrel.