Concerns about AirAsia's financial health have prompted the Malaysian government to prepare contingency plans for the country's largest low-cost carrier, according to Reuters, just months after the airline placed the biggest order in the history of the Airbus A220 program.
The government has asked Malaysia Airlines and Batik Air whether they could absorb some of AirAsia's domestic operations if necessary, people familiar with the discussions told Reuters. The talks have increased in recent weeks and also involve the Finance Ministry and airport operator Malaysia Airports Holdings Berhad.
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AirAsia accounts for about 60% of Malaysia's domestic air travel and 40% of the country's overall aviation market, making any significant reduction in its operations a concern for authorities.
The airline had RM18.4 billion (US$4.51 billion) in current liabilities at the end of June and RM954 million in cash and bank balances. Reuters also reported that AirAsia owes Malaysia Airports at least RM500 million for services including landing and parking fees and has received extensions to make payments.
AirAsia is seeking up to US$1 billion from international debt markets and another RM700 million in local credit facilities, primarily to restructure debt. Two people familiar with its finances told Reuters that at least US$3 billion in fresh capital would be required to address its financial position, an assessment the airline disputes.
AirAsia said its planned financing would be sufficient and that it remains focused on maintaining stable operations. The carrier reported a RM831 million net loss in the second quarter, when sharply higher fuel prices and RM331 million in foreign exchange losses weighed on its results.
150 A220s due from 2028
The reports about AirAsia's financial health come four months after the Malaysian low-cost carrier signed the largest single order ever placed for the Airbus A220.
AirAsia agreed in May to buy 150 A220-300sand secured flexibility to expand the commitment to as many as 300 aircraft. Deliveries are scheduled to begin in 2028.
The order is central to an ambitious fleet renewal and expansion plan. AirAsia intends to use the smaller A220 on thinner routes across Southeast Asia and the wider Asia-Pacific region, while freeing larger A320 and A321 aircraft for higher-demand services.
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AirAsia will also be the launch customer for a new high-density version of the A220-300 configured for 160 passengers, ten more than the previous maximum. Airbus is adding an extra overwing exit on each side of the aircraft to enable the higher capacity.
The deal was particularly significant for Airbus. The 150 firm aircraft pushed total A220 orders beyond 1,000 and provided a major addition to the backlog of a program that the manufacturer is still working to make profitable.
AirAsia's fleet plans now sit alongside efforts to reduce its immediate financial burden. The airline is returning 25 older aircraft to lessors, cutting underperforming routes and renegotiating supplier contracts as it seeks to lower costs, while maintaining plans to begin taking new A220s and A321XLRs from 2028.
