AirAsia's Fernandes says travel demand remains strong, current crisis 'far' less severe than COVID

HONG KONG: AirAsia co-founder Tony Fernandes said on Friday that the low-cost carrier's challenges from soaring jet fuel costs were "far, far" less severe than those it faced during the COVID-19 pandemic, as he sought to reassure investors about the airline's financial health.

Speaking at a media briefing, Fernandes also said AirAsia had "strong liquidity" and was adept at managing cash, adding the current crisis was largely driven by geopolitical tensions and higher fuel prices, while travel demand remained strong.

The briefing came two days after Reuters reported, citing sources, that Malaysia's government had asked Malaysia Airlines and Batik Air whether they could absorb AirAsia's domestic market share.

The sources said it was part of what they described as scenario planning while authorities monitor the financial health of Southeast Asia's largest low-cost carrier.

AirAsia's current liabilities stood at 18.4 billion ringgit (US$4.52 billion) as of June 30, against cash and bank ​balances of 954 million ringgit.

Fernandes told reporters the second quarter marked the toughest period for the airline that controls about 60% of Malaysia's domestic market and he forecast improving conditions as AirAsia adjusts fares to reflect higher fuel costs.

The airline has been hit by soaring jet fuel costs stemming from the US-Israeli war on Iran that surged 66% in the second quarter from the prior quarter to an average of US$183 ​a barrel.

AirAsia shares closed 21% lower on Thursday after the Reuters report. Malaysian financial ‌markets were closed ⁠on Wednesday for a public holiday.

AirAsia shares were trading 2% lower on Friday after falling as much as 5% earlier. The stock has lost more than 70% of its value so far this year.

'NO ONE CAN REPLACE' AIRASIA

AirAsia's large market share in Malaysia has made its financial challenges a significant concern for the government, sources previously told Reuters.

Fernandes said "no one can replace" AirAsia's 100 planes in the country overnight.

The group's load factor, which measures how well an airline is filling available seats, stood at 80% in the third quarter and it sees strong bookings for the fourth quarter, Fernandes said, adding he was optimistic about operations in Indonesia, the Philippines and Thailand.

AirAsia reported a net loss of 831 million ringgit for the second ⁠quarter ended June ​30, hit by rising jet fuel costs and heavy foreign-exchange losses of 331 million ringgit.