SEPANG (April 6): AirAsia X Bhd (KL:AAX), which now houses the entire AirAsia aviation outfit, has hiked its fares by between 30% and 40% as it grapples with soaring jet fuel prices.

With no fuel hedge, group chief executive officer Bo Lingam said its jet fuel prices had risen from US$90 per barrel pre-Middle East conflict to US$200 (RM806.70) per barrel currently. The fuel surcharge, or fee to offset jet fuel costs, alone has risen up to 20%, while overall fares have risen 30% to 40%, he added.

“I will be paying whatever the market price is,” Lingam said during a media briefing on Monday. Fares will be reviewed periodically, he added. 

On why the group doesn’t have a fuel hedge, Lingam put it down to bad luck, noting some were in the works, but prices surged before they were secured.

AirAsia has cut 10% of its flight capacity, mainly due to the end of the Raya festive season and plans to drop unprofitable routes. It is also optimising costs through fleet and other expense cuts. Lingam said no staff have been laid off and there is no unpaid leave granted so far.

Nonetheless, Lingam notes that demand for flights remains strong, suggesting fliers are still able to stomach the higher fares.

Jet kerosene prices surged 140% to above US$200 per barrel last month, following the flare-up of the Iran war. The conflict saw attacks on oil and gas facilities, and more importantly, it blockaded a major shipping bottleneck, the Strait of Hormuz.

AirAsia co-founder and adviser Tan Sri Tony Fernandes assured that the aviation group will clear the ongoing crisis as it had navigated similar situations in the past.

“We have been through so many, it's nothing new to us. Ukraine was just a few years ago, oil then went up to US$120 per barrel, plus Covid-19 at the same time, and we came through that,” he said.

The latest fuel price crisis comes months after Capital A Bhd (KL:CAPITALA), which owns 19% of AAX, completed its regularisation plan to exit the financially beleaguered status of Practice Note 17 (PN17). It has yet to exit its PN17 status.

Under the plan, Capital A disposed of the short-haul aviation arm of AirAsia to AAX, consolidating the entire aviation business. The business was set to move forward with a fleet expansion.

Lingam noted that no changes had been made to its fleet expansion plans thus far. The four aircraft deliveries it expects to receive this year remain unchanged, he said. 

At Monday's noon break, shares in AAX stood one sen or 0.86% higher at RM1.17, valuing the group at RM3.93 billion.