The Air Asia brand is on display in the exhibition hall during the Bali International Airshow 2024 at Ngurah Rai International Airport in Kuta, Bali, Indonesia, on September 19, 2024. The airshow takes place from September 18-21, 2024, in the southern apron of Bali airport to boost the aviation and defense industries in Indonesia. (Photo by Johanes P. Christo/NurPhoto via Getty Images)
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AirAsia is “sustainable” despite media reports to the contrary and is even planning for growth despite soaring fuel prices and geopolitical uncertainty, according to co-founder Tony Fernandes.
Reuters reported earlier this week, citing people with knowledge of the matter, that the Malaysian government had asked Malaysia Airlines and Batik Air whether they could take AirAsia’s domestic market share as part of scenario planning while authorities monitored the carrier’s financial health. Discussions had intensified in recent weeks as concerns mounted over AirAsia’s finances, the report said.
“We’re OK. We’re sustainable,” Fernandes said at a media briefing Friday, denying that the carrier needed a government rescue. “There is no chance of non-sustainability. Zero chance.”
Fernandes said AirAsia had adjusted its cost and revenue structure to cope with higher fuel prices after costs surged from the levels at which the airline had sold many of its tickets. Fuel expenses surged 58% from a year earlier as average jet fuel prices climbed to $183 per barrel, according to the company.
The fundraising “is targeted towards refinancing. It’s $1 billion, not $3 billion. We do not need $3 billion,” Fernandes said.
The Malaysia-based budget carrier said earlier this month that its planned fundraising, comprising up to $1 billion in international debt markets and 700 million ringgit ($171.5 million) in local credit facilities, was primarily aimed at debt restructuring and refinancing, as well as consolidating its balance sheet, rather than funding operational shortfalls.
Fernandes also rejected the suggestion that AirAsia’s operations could simply be replaced by rival carriers, pointing to the roughly 100 aircraft it operates in Malaysia.
“You can’t just step in,” he said, saying AirAsia’s cost structure, network and brand would be difficult to replicate.
What’s more, “we’ll be making a pretty exciting announcement with regards our growth and our strategy with Airbus within the next month,” he said, adding that the airline’s relationship with the aircraft maker was “fantastic.”
Next moves
AirAsia is leaning more heavily on artificial intelligence, already seeing about 3% in fuel savings from the technology and with plans to roll out new customer-facing AI features over the next three months, Fernandes said.
Fernandes said AirAsia would continue entering markets where it could make money and provide better value than competitors, in response to questions from CNBC.
He also said AirAsia’s tie-up with Turkey’s Pegasus Airlines could serve as a model for further expansion, and that European low-cost airlines had inquired about potential partnerships.
The airline cut capacity by 11% during the quarter and suspended underperforming long-haul routes, while reducing fleet allocations in the Philippines and Indonesia. AirAsia said it plans to restore capacity to pre-war levels in the fourth quarter as year-end travel demand picks up.
