AirAsia is missing payments to some suppliers as fuel costs bite - Bloomberg News

AirAsia is reportedly missing payments to some suppliers, according to a Bloomberg News report. The budget airline, which has been hit hard by the recent surge in oil prices following the Middle East conflict, is struggling to manage its cash flow. Jet fuel typically accounts for about one-third of an airline’s operating costs, and carriers are particularly vulnerable to prolonged high fuel prices.

The situation has been exacerbated by AirAsia’s decision not to hedge fuel costs when oil prices were lower, a strategy that has backfired as prices have spiked. The airline’s stock has been among the worst performers globally, losing nearly half its market value in the days following the escalation of the conflict. While oil prices have since retreated slightly, the damage to AirAsia’s finances has been significant, with one analyst estimating a potential loss of 1.4 billion ringgit ($353 million) for the company.

In response, AirAsia has introduced temporary fuel surcharges to offset some of the costs, though it has assured customers that these are not permanent. The airline has also been forced to cut capacity and suspend certain routes, particularly those deemed unprofitable amid the fuel crisis. Despite these challenges, AirAsia remains committed to maintaining affordable fares for travelers, a core principle of its low-cost business model.

The airline is also testing the market with a $230 million private-credit deal led by Deutsche Bank, backed by ticket sales from several routes. This follows a similar $443 million securitized bond in 2024, indicating AirAsia’s ongoing efforts to secure alternative financing amid financial strain.