AirAsia co-founder Tony Fernandes said on Friday that the low-cost carrier had "strong liquidity" to weather soaring jet fuel costs, as he sought to ease investor concerns about the airline's financial health that have sent its shares to near four-year lows. 

Speaking at a media briefing, Fernandes said AirAsia was adept at managing cash and expected to raise more than $1 billion, mostly to refinance existing debt, by December or January.

"COVID was far, far worse than what we are dealing with now," he said from Bangkok. "We couldn't fly then, but we can fly now and our demand is very strong."

Fernandes' briefing came two days after Reuters reported, citing sources, that Malaysia's government had asked Malaysia Airlines and Batik Air whether they could absorb AirAsia's domestic market share. 

The sources said it was part of what they described as scenario planning while authorities monitor the financial health of Southeast Asia's largest low-cost carrier.

A spike in jet fuel prices stemming from the Iran war has affected airlines globally, contributing to the collapse of debt-laden US carrier Spirit Airlines in May and a Chapter 11 bankruptcy filing by Latvia's airBaltic on Monday.

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AirAsia's current liabilities stood at 18.4 billion ringgit ($4.52 billion) as of June 30, against cash and bank ​balances of 954 million ringgit. 

Fernandes told reporters the second quarter marked the toughest period for the airline that controls about 60 percent of Malaysia's domestic market and he forecast improving conditions as AirAsia adjusts fares to reflect higher fuel costs.

The loss-making airline's fuel costs surged 66 percent in the second quarter from the prior quarter to an average of $183 ​a barrel and it has no hedging in place.

AirAsia's shares have fallen about 24 percent since Reuters published its report on Wednesday, hitting the lowest level since December 2022. The stock has lost more than 70 percent of its value so far this year. 

'No One Can Replace' AirAsia 

Malaysia's finance ministry has hired Alton Aviation Consultancy to assess AirAsia's funding needs as it weighs what support, if any, it could extend to the airline given its importance to the local economy, Reuters reported this month.

"We've never received any government support in the last 25 years. And as of today, we haven't got any and that's it," Fernandes said on Friday. 

He said there had been no discussions with the government and "we do not need rescue, bailout, whatever."

Fernandes added that "no one can replace" AirAsia's 100 planes in the country overnight. "You have to have our cost structure, our brand, our market, our network," he said.

AirAsia said this month ​it was advancing discussions with financial institutions, ⁠targeting up to $1 billion from international debt markets plus 700 million ringgit in local credit facilities, primarily to restructure its debt.

"The refinancing is...not raising fresh capital. It's about bringing down costs," Fernandes said.

He said AirAsia was in talks with a major global bank on a bond transaction and the airline had also received an offer from a Middle Eastern investor for $1 billion in funding with a term sheet signed pending due diligence, but it was holding out for better terms.

The group's load factor, which measures how well an airline is filling available seats, stood at 80 percent in the third quarter and it sees strong bookings for the fourth quarter, Fernandes said, adding he was optimistic about operations in Indonesia, the Philippines and Thailand. 

The carrier has been restructuring aggressively, cutting underperforming routes, returning 25 older aircraft to lessors and renegotiating contracts with vendors to reduce costs.

Fernandes said no planes had been repossessed or their returns forced by lessors.

AirAsia is also accelerating its A321LR and XLR strategy to phase out fuel-inefficient A330s, and Fernandes said the airline expects "a pretty exciting announcement" with Airbus within the next month regarding its growth and strategy. 

($1 = 4.0750 ringgit)

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