AirAsia Group is shelving its long-haul network-carrier ambitions and refocusing on its home Southeast Asian markets as high fuel prices force a group-wide “adjustment period.” Co-founder Tony Fernandes used a September 18 press conference to defend the airline’s finances while confirming capacity cuts, a shelved Bahrain hub plan, and a new codeshare with Turkish low-cost carrier Pegasus.
Key Facts At A Glance
- AirAsia Group is returning to its “core markets” of domestic, Southeast Asian and broader Asian operations
- The group has cut up to 25% of capacity as part of a network restructuring through September
- Plans for a Bahrain hub, intended as a gateway to Europe, have been shelved amid regional conflict
- AirAsia signed its first-ever codeshare agreement, with Turkish low-cost carrier Pegasus Airlines, in September
- April–June quarter loss after tax: MYR831 million ($204 million), versus a MYR919 million profit in the same period last year
- Quarterly fuel expenses rose 58% year-on-year
- The group is seeking over $1 billion in financing to restructure debt and strengthen its balance sheet, with the process expected to conclude by year-end
AirAsia Group co-founder Tony Fernandes said the airline is “very much returning to our roots” of operating within Asia, describing a period of high fuel prices as an “adjustment” rather than a crisis. Speaking at a wide-ranging virtual press conference on September 18, Fernandes said the group’s best use of its aircraft right now is domestic Thailand, domestic Malaysia, and routes across ASEAN, China and India.
The comments come as AirAsia Group has cut as much as 25% of its capacity through September, part of a broader effort to trim unprofitable routes from its network. Fernandes was explicit that the retreat does not mean the group is abandoning its 2025-era pitch to become the world’s first low-cost network carrier, with long-term ambitions of flying narrowbody aircraft to Europe and North America from its Southeast Asian hubs. Those plans, however, are now on hold: “One day we will do it for sure. But now is not the right time,” he said.
Bahrain Hub Shelved, Pegasus Codeshare Fills The Gap
Part of that long-haul strategy involved establishing a Middle East hub in Bahrain to serve as a gateway to Europe. Those plans have been shelved following the ongoing regional conflict. In place of building its own European gateway, AirAsia is turning to partnerships. In September, the group signed its first-ever codeshare agreement, with Turkish low-cost operator Pegasus Airlines, leaning on its existing Kuala Lumpur–Istanbul route to extend its reach into Europe. “We are not giving up that dream…[but] we work with other people,” Fernandes said.
Fernandes Pushes Back On Financial-Distress Reports
Much of the press conference was devoted to countering media speculation about AirAsia’s financial health. Fernandes called a Reuters report — which said the Malaysian government had asked other operators to prepare to absorb AirAsia’s domestic market share as a contingency — “the most ludicrous statement I have seen in 25 years” of running the airline, and said the government “said no such thing.” He also denied the group is facing a liquidity crunch, despite what he called a “tough” April–June quarter.
The numbers back up the description of a difficult quarter. AirAsia Group reported a loss after tax of MYR831 million ($204 million) for April–June, compared with a pro-forma profit after tax of MYR919 million in the same period the previous year. Fuel expenses for the quarter rose 58%, outpacing any savings the group achieved on maintenance and user charges. Fernandes said the group simply needs to “adjust our cost structure and fares,” and expects liquidity to improve by the end of the third quarter.
Financing Push Underway
AirAsia is also seeking more than $1 billion in financing to restructure its debts and consolidate its balance sheet, a process the group expects to complete by the end of the year. Fernandes framed the current period as transitional, saying the group will emerge from the fuel-price crisis “stronger than before.”