Malaysia’s government has held discussions with Malaysia Airlines and Batik Air about their ability to absorb AirAsia’s domestic market share as authorities monitor the low-cost carrier’s financial position, according to people familiar with the matter.
The talks are part of contingency planning and have increased in recent weeks as AirAsia faces pressure from sharply higher fuel costs and other financial challenges.
AirAsia’s fuel expenses surged during the second quarter of 2026 as average jet fuel prices reached about US$183 a barrel. The carrier reported a net loss of RM831 million for the quarter, including a RM331 million foreign-exchange loss.
AirAsia said it remains focused on maintaining business continuity and stable operations while working with financial institutions on new funding. The company is seeking up to US$1 billion from international debt markets along with RM700 million in local credit facilities, mainly to restructure existing debt.
The airline had RM18.4 billion in current liabilities as of June 30 and held RM954 million in cash and bank balances. People familiar with the situation estimated that it could require at least US$3 billion in fresh capital, although AirAsia said its financing targets were sufficient to meet its requirements.
The Malaysian government has also discussed how Malaysia Airlines and Batik Air could respond if AirAsia were to reduce its domestic operations. Both airlines have indicated that they could expand organically to take on additional routes and passengers.
However, the two carriers would require access to AirAsia’s aircraft leases if they were expected to take over its operations on a larger scale, according to one person familiar with the discussions.
AirAsia accounts for about 60 per cent of Malaysia’s domestic flying, making its financial position relevant to the country’s domestic air connectivity.
Malaysia Airports Holdings Berhad, which operates the country’s airports, is also involved in the broader discussions. The airport operator said it regularly engages airlines about capacity and route opportunities but declined to comment specifically on AirAsia’s financial outlook.
AirAsia has already begun restructuring its operations. The group has cut underperforming routes, plans to return 25 older aircraft to lessors and is renegotiating contracts with suppliers and other vendors to reduce costs.
The government is therefore examining possible scenarios while AirAsia pursues new financing and operational changes. The discussions do not indicate that a takeover or transfer of AirAsia’s operations has been decided, and Malaysia Airlines and Batik Air have not agreed to acquire the carrier’s business.
AirAsia said it continues to see demand across its network and is working with stakeholders to manage its financial and operational requirements as it navigates the current period of higher fuel costs and financial pressure.
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