SEPANG: AirAsia X Bhd
is entering the second half of 2026 facing one of its toughest operating environments since emerging from the pandemic.
However, management believes strong travel demand across Asean, disciplined network management, and the benefits of its newly integrated airline structure will help the low-cost carrier navigate another external shock.
The airline, which only recently completed the consolidation of its short-haul and long-haul businesses under a single aviation platform, said demand remained healthy despite higher fares, volatile fuel prices, and continuing geopolitical uncertainty affecting parts of its longer-haul growth plans.
Tan Sri Jamaludin Ibrahim who joined the group during the Covid-19 period and now takes over as chairman at a critical phase in AirAsia’s restructuring, said the company is better positioned than in previous downturns due to its stronger operational base and enlarged network.
“I’m excited to be joining AirAsia X, especially after the recent consolidation of all the seven airlines – short-haul and medium-haul – into one large cohesive group.
“While we are experiencing a period of global uncertainty, we are entering this phase from a position of strength,” he said.
Jamaludin added that the airline’s lean cost base, strong regional network and Fly-Thru connectivity through Kuala Lumpur provide structural advantages that allow management to move capacity quickly to where returns are strongest.
“The group’s fundamentals are solid, supported by a lean and disciplined cost structure, a resilient Asean-focused network and robust Fly-Thru connectivity that allows us to respond quickly to market changes,” he said.
That confidence comes even as jet fuel has become the group’s biggest immediate concern.
AirAsia co-founder and adviser Tan Sri Tony Fernandes described the current environment as another crisis for aviation, driven mainly by fuel costs that have surged sharply across global markets.
He said the company has three options: raising fares, which it prefers to minimise but considers unavoidable; cutting some capacity; and reducing certain costs.
According to group chief executive officer Bo Lingam, soaring jet fuel prices have forced the airline to carefully adjust fares route by route, rather than imposing blanket increases, to preserve affordability while protecting profitability.
“Amid ongoing geopolitical uncertainty and supply chain disruptions, global jet fuel prices have surged to more than double 2025 levels. In response, we have implemented carefully calibrated fare adjustments, including a one-off fuel surcharge across the network,” he said.
Citing timing as a key factor, the budget carrier did not hedge its fuel, as jet fuel prices had risen from US$90 per barrel before the Middle East conflict to US$200 (RM806.70) per barrel currently.
Lingam said the airline had been evaluating fuel hedging options earlier this year, but the plan was put on hold as volatility escalated before any position could be taken.
“We were working on this and preparing for hedging, but it happened before we could execute. It is just bad timing,” he added.
Internally, Amanda Woo, chief commercial officer, said fuel analytics are now being applied on a sector and flight-hour basis to determine where costs can be absorbed and where price adjustments are necessary.
“We are able to spread in a very careful way to the routes that we think we can actually cover the current high fuel surcharge,” she explained.
Woo said the airline has added about 20% in fuel surcharges, with fare increases averaging 31% to 40% on selected sectors, depending on route economics.
Even so, Lingam emphasised that demand has remained robust, particularly within Asean.
Forward bookings across core short-haul markets continue to hold up strongly, reinforcing the airline’s focus on Kuala Lumpur as its main low-cost hub.
“While we are operating in an increasingly challenging environment, we are seeing strong demand across our Asean destinations, which demonstrates the resilience of our network and the growing appetite for regional travel.”
Lingam added that Kuala Lumpur remains central to the group’s strategy as a regional low-cost mega hub, connecting passengers across Asia through affordable transit traffic.
Operationally, he said the airline has cut around 10% of flights across the group, mainly after the Hari Raya peak, while reallocating aircraft to stronger-performing sectors.
Rather than withdrawing routes broadly, AirAsia is reducing frequencies on selected sectors and redeploying aircraft to markets where yields remain stronger. He cited Kota Kinabalu as an example.
“Kota Kinabalu had 14 flights. People might wonder why I cut flights, but I reduced them to 12. These flights are not cancelled; I’ll increase frequency again when demand returns,” he explained.
The beneficiaries of AirAsia’s capacity shift are increasingly Central Asian and transit-heavy routes.
The airline is actively reallocating aircraft to Almaty, Tashkent, and Istanbul, where displaced demand has strengthened passenger loads.
According to Woo, demand in Central Asia is strong. Over the last two weeks, AirAsia has seen both inbound and outbound sectors from Central Asia operating at around 80% load factor.
Fernandes said Istanbul is becoming an important bridge into Europe, while longer-haul expansion remains dependent on geopolitical conditions.
“Istanbul, while we’re waiting for Bahrain, is a great way of getting to Europe and for Europeans to get to Asia,” he said.
At the same time, the group reaffirmed that Bahrain remains strategically important despite regional uncertainty.
Fernandes said Bahrain flights are still scheduled to begin on June 26, aiming to connect Asia, the Middle East, and Europe once conditions stabilise.
“We are still very committed to Bahrain, and our first flight is June 26,” Fernandes said.
Behind the airline’s operating strategy, Fernandes highlighted the wider Capital A Bhd ecosystem as a critical factor in preserving resilience.
“The strength of the Capital A ecosystem continues to provide resilience to aviation – cutting costs while driving higher revenue.”
He cited AirAsia MOVE for stronger ticket sales and connectivity, Asia Digital Engineering for lower maintenance costs, and AirAsia NEXT for digital sales optimisation.
Fleet management remains another key lever, with four long-range aircraft still scheduled for delivery this year with no immediate delays, while discussions continue on expanding both leased aircraft and future orders.
Jamaludin noted that, in the longer term, current pressures may accelerate stronger industry collaboration rather than dampen growth ambitions.
“The current challenges extend beyond airlines, as it involves all players in the aviation ecosystem, but this provides an opportune time for us to work closely with our partners to strengthen the competitiveness of the industry.”
