AirAsia CEO Tony Fernandes Says Airline Can Withstand Jet Fuel Cost Surge

Post by : Saif

AirAsia co-founder Tony Fernandes said the low-cost airline has enough liquidity to manage a sharp increase in jet fuel prices, while strong passenger demand continues to support its operations.

Speaking to reporters on Friday, Fernandes said AirAsia was in a stronger position than during the COVID-19 pandemic because flights are operating and passenger demand remains healthy.

He said the airline expects to raise more than $1 billion, mainly through refinancing existing debt, by December or January.

Jet Fuel Costs Rise Sharply

AirAsia has faced significant pressure from higher jet fuel prices linked to the Iran war. The airline's fuel costs increased 66% in the second quarter from the previous quarter, reaching an average of about $183 per barrel.

The carrier currently has no fuel hedging in place, making fuel price movements an important factor for its financial performance.

Fernandes said the second quarter was the most difficult period for AirAsia but expects conditions to improve as the airline adjusts ticket prices to reflect higher fuel expenses.

Strong Travel Demand Supports Airline

Passenger demand remains a key positive factor for AirAsia. Fernandes said the airline's load factor reached 80% during the third quarter, showing that a large share of available seats were filled.

He also said fourth-quarter bookings remain strong.

AirAsia expects continued growth in markets including Indonesia, the Philippines and Thailand. The airline is also working to adjust its network and capacity according to demand.

AirAsia Faces Financial Pressure

AirAsia's current liabilities stood at 18.4 billion ringgit, or about $4.52 billion, as of June 30. Its cash and bank balances were around 954 million ringgit.

The airline's financial position has increased concerns among investors. Its shares have fallen sharply and were trading near a four-year low.

Fernandes said AirAsia is focused on managing cash and reducing costs rather than seeking a government rescue.

Read more: US Approves $2.3 Billion Sale of Patrol Aircraft, Torpedoes and Defence Gear to Singapore

Refinancing Plan Targets More Than $1 Billion

AirAsia is in discussions with financial institutions to raise funds through international debt markets and local credit facilities.

The airline is targeting up to $1 billion from international debt markets, along with around 700 million ringgit in local credit facilities.

Fernandes said the refinancing is intended mainly to reduce financing costs and restructure existing debt rather than raise fresh capital.

He also said AirAsia has received a $1 billion funding proposal from a Middle Eastern investor. The company has signed a term sheet and is conducting due diligence, while continuing to consider the terms of the offer.

No Immediate Government Bailout Needed

Malaysia's government has been monitoring AirAsia's financial situation because of the airline's importance to the country's domestic aviation market.

Fernandes said AirAsia has not received government support during its 25-year history and said there had been no discussions about a rescue or bailout.

He also highlighted the airline's large domestic presence, saying its fleet of around 100 aircraft could not simply be replaced by competitors overnight.

AirAsia controls roughly 60% of Malaysia's domestic market, making its financial stability important for the country's aviation sector.

Airline Cuts Costs and Restructures Operations

AirAsia has been taking several steps to reduce expenses. The carrier has cut underperforming routes, returned 25 older aircraft to lessors and renegotiated contracts with suppliers.

Fernandes said no aircraft had been repossessed or forcibly returned by lessors.

The airline is also accelerating its strategy to use Airbus A321LR and A321XLR aircraft while reducing its reliance on less fuel-efficient A330 planes.

AirAsia expects to make an announcement with Airbus within the next month covering its future growth and business strategy.

#trending #latest #AirAsia #TonyFernandes #AirAsiaNews #Aviation #AirlineNews #JetFuel #FuelPrices #MalaysiaAviation #AirTravel #LowCostAirline #Airbus #A321XLR #A321LR #AviationIndustry #TravelNews