The AirAsia brand will be showcased at the exhibition hall of the Bali International Air Show 2024, to be held on September 19, 2024 at Ngurah Rai International Airport in Kuta, Bali, Indonesia. The air show will be held at the south apron of Bali Airport from September 18 to 21, 2024, with the aim of revitalizing Indonesia’s aviation and defense industry. (Photo by: Johanes P. Christo/NurPhoto, Getty Images)
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Co-founder Tony Fernandes says AirAsia is “sustainable” despite media reports to the contrary and plans to grow despite rising fuel prices and geopolitical uncertainty.
Reuters reported earlier this week, citing people familiar with the matter, that the Malaysian government had asked Malaysia Airlines and Batik Air whether they could take away AirAsia’s domestic market share as part of scenario planning while authorities monitor the airline’s financial health. The debate has intensified in recent weeks amid growing concerns about AirAsia’s finances, according to the report.
“We are fine. We are sustainable,” Fernandes said at a press conference on Friday, denying the airline needed government rescue. “There’s no chance it’s unsustainable. There’s zero chance.”
Fernandes said AirAsia adjusted its cost and revenue structure to deal with higher fuel prices after costs rose from the levels at which it sold many of its tickets. The company said fuel costs rose 58% from a year ago as the average price of jet fuel rose to $183 per barrel.
Fernandez said the financing was “to refinance. It’s $1 billion, not $3 billion. We don’t need $3 billion.”
The Malaysia-based low-cost airline announced earlier this month that its planned fundraising of up to $1 billion in international debt markets and 700 million ringgit ($171.5 million) in domestic credit facilities will primarily be aimed at restructuring and refinancing debt and strengthening its balance sheet, rather than funding operating shortfalls.
Fernandes also pointed to the approximately 100 aircraft operated by AirAsia in Malaysia and rejected the idea that AirAsia’s operations could simply be replaced by a rival airline.
“It’s not an easy entry,” he said, adding that AirAsia’s cost structure, network and brand would be difficult to imitate.
“We will be making some very exciting announcements within the next month regarding our growth and our strategy with Airbus,” he said, adding that the relationship between the airline and the aircraft manufacturer is “excellent”.
next move
AirAsia is increasing its reliance on artificial intelligence, with the technology already seeing fuel savings of around 3% and plans to roll out new customer-facing AI capabilities within the next three months, Fernandes said.
In response to a question from CNBC, Fernandes said AirAsia will continue to operate profitably and in markets where it can offer better value than its competitors.
He also said that AirAsia’s partnership with Turkey’s Pegasus Airlines could serve as a model for further expansion, and that European low-cost carriers have been approached about possible partnerships.
The airline cut capacity by 11% in the quarter, halting underperforming long-haul routes, and slashing fleet allocations in the Philippines and Indonesia. AirAsia said it plans to return capacity to pre-war levels in the fourth quarter as demand for travel increases at the end of the year.
