AirAsia is reportedly facing financial pressure following the sharp increase in aviation fuel prices due to the conflict in the Middle East.
The situation has caused the low-cost airline to delay several payments to suppliers and aircraft lessors to manage its cash flow.
According to reports, AirAsia has missed several payments to Rolls-Royce, a company that provides aircraft engine maintenance services through the TotalCare agreement.
Rolls-Royce is a key supplier to AirAsia as its engines are used in some of the company's fleet.
In addition, AirAsia has also asked several aircraft lessors to delay rental payments for more than 16 aircraft due to significant increases in operating costs.
AirAsia X Group CEO Bo Lingam said several lessors understood the challenges facing the aviation industry at the moment and agreed to provide additional time for payments to be made.
The Iran conflict has had a major impact on low-cost airlines as they have limited room to increase ticket prices without affecting price-sensitive passenger demand.
Like many other low-cost carriers, AirAsia leases most of its aircraft rather than buying them outright.
The move helps reduce high start-up costs, but makes the company more reliant on monthly lease payment commitments.
AirAsia co-founder Tony Fernandes, however, insisted the company was not facing serious financial problems.
According to him, AirAsia was still able to obtain financing from international financial institutions, including a US$230 million credit line agreement obtained from Deutsche Bank earlier this year.
He also explained that any issues related to lease payments or maintenance were part of the normal negotiation process in the industry.
Although AirAsia recorded its biggest quarterly loss in three years and its share price fell more than 30% since the Iran conflict, the company is still pressing ahead with its expansion plans.
Recently, AirAsia announced the purchase of 150 new Airbus A220 aircraft worth billions of dollars.
According to Fernandes, AirAsia has experience in weathering difficult situations and he believes the company can weather the current challenges just as it has successfully recovered from the Covid-19 pandemic.
