This article first appeared in The Edge Malaysia Weekly on August 24, 2026 - August 30, 2026

AIRASIA Group Bhd (KL:AAGB), formerly known as AirAsia X Bhd, is seeking to raise at least US$1 billion (RM4.03 billion) from the international debt market, sources say, as the budget airline moves to shore up liquidity amid surging fuel costs and mounting losses following the Iran war.

The fundraising comes after two consecutive quarterly losses as the airline faces mounting pressure from higher jet fuel prices and foreign exchange (forex) losses.

An AirAsia spokesperson did not directly comment on the fundraising plans, saying: “Should there be any material developments or official announcements to be made, we will disclose them through the proper channels and regulatory filings in due course.”

According to sources, Singapore-based specialist advisory firm Alton Aviation Consultancy has been appointed to assist AirAsia in securing the proposed US$1 billion financing from the international debt market. 

When contacted by The Edge, Alton Aviation said it was unable to comment on matters relating to AirAsia.

AirAsia said when reporting its second-quarter results on Aug 13 that it was progressing with a series of capital management initiatives. These include discussions with local and international financial institutions for up to US$1 billion in funding and RM700 million in local facilities, alongside plans for targeted public and private bond issuances.

Its need for additional capital reflects the broader strain facing global carriers. Jet fuel prices have surged following the conflict in the Middle East, with the global average jet fuel price reaching US$158.91 per barrel in the week ended Aug 14, up 76.5% from a year earlier, according to the S&P Global Platts Jet Fuel Price Monitor.

AirAsia has been particularly exposed because it entered the year without fuel hedges, leaving it vulnerable to the full impact of the price increase.

The airline has warned that fuel costs have become increasingly difficult to forecast and has withdrawn all of its internal targets for 2026.

Its net loss widened to RM527.16 million in the second quarter ended June 30, 2026 (2QFY2026), from RM154.88 million in the preceding quarter. Revenue fell 14.5% to RM5.09 billion from RM5.95 billion.

The deterioration was driven largely by a 66% quarter-on-quarter increase in average fuel prices while the group also recorded net forex losses of RM331 million as major currencies weakened against the US dollar.

AirAsia has responded by raising fuel surcharges and fares. Depending on the route and destination, fuel surcharges have risen by about 20% while overall airfares have increased by between 30% and 40%.

But there is limited room to pass on higher costs in full to passengers. AirAsia’s core customer base is highly price-sensitive, meaning further fare increases risk weakening demand and eroding the very traffic volumes on which the low-cost model depends.

The pressure is likely to persist through the third quarter, traditionally the weakest period for regional travel.

AirAsia plans to cut seat capacity by between 20% and 25% year on year in the third quarter, temporarily suspending underperforming routes. It also plans to return 25 older and less fuel-efficient aircraft to lessors during the current financial year. The airline had 161 operating aircraft at the end of June.

At the same time, AirAsia continues to invest in fleet renewal, with 150 Airbus A220s and 70 A321XLR (extra long-range) deliveries starting in 2028.

The need for fresh funding highlights the extent to which the airline’s recovery has been disrupted. Earlier this year, AirAsia acquired parent Capital A Bhd’s (KL:CAPITALA) short-haul airline operations for RM6.8 billion through a dividend-in-specie arrangement while assuming RM3.8 billion previously owed by Capital A to AirAsia Bhd.

The transaction helped Capital A exit Bursa Malaysia’s Practice Note 17 status in May, marking an important milestone in the group’s post-pandemic recovery.

But that recovery has been knocked off course by the Middle East conflict that erupted in February.

The decision not to hedge fuel prices has left AirAsia particularly vulnerable to the surge in jet fuel costs. While higher fares and surcharges have helped offset part of the increase, the airline faces a delicate balancing act: raise prices enough to protect margins without pushing passengers towards competitors or suppressing demand.

For now, the focus is on liquidity.

As at June 30, 2026, AirAsia had net debt of RM2.27 billion, cash of RM953.67 million and borrowings of RM3.13 billion. Lease liabilities stood at RM13.3 billion, including deferred aircraft leases, supported by right-of-use assets of RM11.9 billion.

The group has already drawn on earlier fundraising. The RM1 billion raised through a private placement announced in July 2024 has been used for working capital, including payments to lessors, suppliers, contractors, consultants and other creditors, as well as staff salaries, debt repayment and capital expenditure.

It secured a further US$300 million in new financing in the first quarter of 2026.

Securing another sizeable package could prove difficult. With airlines around the world facing volatile fuel prices and uncertain demand, banks and other financial institutions may be reluctant to increase their exposure to the sector.

One industry observer says AirAsia’s balance sheet may not be sufficient to support borrowings of meaningful size without some form of guarantee.

That raises the question of whether the Malaysian government might ultimately provide support.

AirAsia is one of Asia’s largest low-cost carriers and an important contributor to Malaysia’s aviation and tourism sectors. Its operations support more than one million direct and indirect jobs across Asean and make a significant contribution to the Malaysian economy.

Its ability to secure the proposed US$1 billion in international financing will be closely watched by investors as the airline navigates its most difficult operating environment since the Covid-19 pandemic.

The fundraising will also test lenders’ confidence in the airline’s post-restructuring balance sheet and potentially the willingness of its shareholders and the government to provide support if market financing proves insufficient.

AirAsia co-founders Tan Sri Tony Fernandes and Datuk Kamarudin Meranun remain the airline’s two largest shareholders. Fernandes holds a direct stake of 0.36% and an indirect stake of 31.3% through Tune Air Sdn Bhd and Tune Live Sdn Bhd. Kamarudin holds a direct stake of 4.26% and an indirect stake of 29.31% through Capital A and Tune Group Sdn Bhd.

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