Air Asia returns 25 aircraft as losses mount and government weighs options

Air Asia is handing back 25 aircraft and working to cut costs as it deals with high operating expenses and old debts, according to a report on the carrier's financial position. The group, based in Malaysia, is the largest low-cost airline group in Asia.

In the second quarter the company recorded a net loss of roughly 175 million euros. It attributed the result largely to higher jet fuel prices following the Iran war and to significant currency losses. The group had only limited hedging in place against rising fuel prices, which left it more exposed than carriers that had bought protection.

Malaysia's government is watching the situation closely and is reportedly preparing for a further shrinking of the airline. Part of that preparation involves planning for the possibility that other airlines would have to serve the routes Air Asia currently operates.

The source compares Air Asia's difficulties with those of Air Baltic, which has filed for Chapter 11 creditor protection in the United States and must sharply reduce its fleet and restructure its debts and lease agreements. The report notes that while the causes differ, the mechanics are similar: heavy ongoing obligations made worse by factors the carriers barely control, such as geopolitical shocks, natural disasters, recessions and technical problems, including recent issues with Pratt & Whitney engines.