JAKARTA - AirAsia is facing new pressure from a surge in jet fuel prices. The low-cost airline was reportedly late paying a number of suppliers and asked for a delay in payment of leases for some of its aircraft.
Launching a report by The Straits Times citing Bloomberg, Wednesday, June 24, AirAsia X is said to have requested a suspension of payments related to at least a dozen aircraft after fuel prices rose due to the Iran conflict.
Rolls-Royce Holdings is also said to have informed AirAsia of the outstanding payment in the TotalCare agreement, an aircraft engine maintenance service. Rolls-Royce manufactures and maintains engines for about a tenth of AirAsia's total fleet of around 250 aircraft.
AirAsia is also reported to have asked a number of aircraft leasing companies to postpone rental payments for more than 16 aircraft.
AirAsia X Group CEO Bo Lingam said some leasing companies understood the situation and gave AirAsia extra time to pay.
The cheapest airline is the fastest to feel the pressure of avtur because the room to raise ticket prices is limited. Passengers in this segment are generally more sensitive to fare increases.
AirAsia leases most of its planes. Data from aviation consultant Cirium shows that about 98 percent of AirAsia's fleet is on lease status. This is a common practice for low-cost airlines to avoid the high cost of purchasing aircraft.
AirAsia founder Tony Fernandes said the company was at odds with Rolls-Royce over the handling of aircraft engines. However, regarding the rental payment, he said there was nothing extraordinary.
Fernandes also denied that AirAsia was in financial difficulties. He said the company could still get funding from Deutsche Bank.
In early 2026, AirAsia received funding of 230 million US dollars or around 298 million Singapore dollars through a private credit scheme from Deutsche Bank.
Rolls-Royce representatives declined to comment on the report or Fernandes' statement. A number of leasing companies that work with AirAsia also did not respond.
The pressure of fixed costs is felt. In May, AirAsia recorded the largest quarterly loss in the last three years.
According to Bloomberg Intelligence data, AirAsia's debt level is also high compared to the company's profit and capital.
Even so, Fernandes remains aggressive in expanding. He just announced a deal worth billions of US dollars to buy 150 Airbus A220 aircraft.
Fernandes said AirAsia had survived the Covid-19 pandemic through debt restructuring and believed the company was also able to overcome the impact of the Iran conflict.
"Why waste a crisis? In a crisis there are always opportunities," said Fernandes.
"We can't control what happens in the Middle East, but we have to think that this situation will not last two years," he said.
On the other hand, AirAsia's operating profit before a number of costs is still quite strong. Its value is said to be able to cover interest expenses up to five times, higher than the average airline in the Bloomberg Intelligence index.
The price of jet fuel has indeed fallen from its peak in late March, but it is still historically high even though the United States and Iran are getting closer to a peace deal.
The International Air Transport Association (IATA) estimates that global airlines will incur additional fuel costs of up to 100 billion US dollars this year. This condition has the potential to cut almost half of the airline industry's profits by 2026.
AirAsia does not hedge or hedge fuel prices. Hedging is a strategy to lock in prices to reduce risk when jet fuel prices soar. Without this protection, the impact of rising fuel prices is directly felt by the company.
Since the Iran conflict broke out, AirAsia's shares have fallen more than 30 percent and are among the worst in the Bloomberg World Airlines Index.
The Straits Times also reported that AirAsia's shares have recently started to recover after US President Donald Trump signaled that a US-Iran peace deal was nearing, which also pressured world oil prices.
Other low-cost airlines are experiencing similar pressures. In India, SpiceJet cut more than 40 percent of its flights in June compared to February and was several times late in paying employees. The company said it was paying employees in stages.
The increase in jet fuel prices puts pressure on AirAsia from two directions. Operating costs are increasing, while the room to raise fares is still limited amid a low-cost airline market that is very sensitive to prices.
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