Report: Govt asks Malaysia Airlines, Batik Air if they can absorb AirAsia routes amid financial strain

AirAsia has been hit by soaring jet fuel costs stemming from the US-Israeli war on Iran, with costs rising 66 per cent in the second quarter from the previous quarter to an average of US$183 a barrel. — AFP pic

First Published: Wednesday, 16 Sep 2026 12:27 PM MYT

KUALA LUMPUR, Sept 16 — Putrajaya has asked Malaysia Airlines and Batik Air whether they could absorb AirAsia’s domestic market share as authorities monitor the financial health of the country’s biggest low-cost carrier, two people familiar with the matter told Reuters.

The discussions, which have increased in recent weeks, are part of scenario planning involving the Finance Ministry and state-linked airport operator Malaysia Airports Holdings Bhd (MAHB), as concerns grow over AirAsia’s financial pressures, the news agency reported.

According to the report Malaysia Airlines and Batik Air have told the government they would be willing to expand organically to take on AirAsia’s routes and passengers rather than acquire its entire business, one of the people said.

However, they would only consider taking over AirAsia’s operations on a large scale if they could also assume its aircraft leases, as absorbing its routes and passenger volumes without the aircraft would be considerably more difficult, the source said.

AirAsia has said it accounts for about 40 per cent of Malaysia’s overall aviation market and 60 per cent of domestic flying, making its financial position a significant concern for the government, according to the people Reuters spoke to. 

AirAsia has been hit by soaring jet fuel costs stemming from the US-Israeli war on Iran, with costs rising 66 per cent in the second quarter from the previous quarter to an average of US$183 a barrel.

AirAsia reported a net loss of RM831 million for the quarter ended June 30, including RM331 million in foreign-exchange losses. Its current liabilities stood at RM18.4 billion as of June 30, according to Reuters.

The airline owes MAHB at least RM500 million for services including landing and parking fees, according to the people and two others familiar with the matter. MAHB has already granted AirAsia repayment extensions, two of the people said.

AirAsia said this month it was advancing discussions with financial institutions to raise up to US$1 billion from international debt markets and RM700 million in local credit facilities, primarily to restructure its debt.

Two people familiar with the matter estimated it needed at least US$3 billion in fresh capital.

AirAsia said its financing targets were sufficient to meet its requirements and that it had RM954 million in cash and bank balances as of June 30.

The airline also said it remained focused on business continuity and stable operations, with strong underlying demand across its network.

Other options discussed include the government providing some form of endorsement to support AirAsia’s efforts to raise fresh capital from external investors, although the exact nature of any potential support remains unclear, according to the report. 

AirAsia has also been restructuring, cutting underperforming routes, returning 25 older aircraft to lessors and renegotiating vendor contracts to reduce costs.

Reuters reported earlier this month that the Finance Ministry had hired Alton Aviation Consultancy to assess the airline’s funding needs as the government considers whether to provide support.