Malaysia explores handing AirAsia's domestic routes to rival carriers

Malaysia's finance ministry and state-linked airport operator MAHB are discussing with Malaysia Airlines and Batik Air the possibility of absorbing AirAsia's domestic network, according to two sources familiar with the matter. The discussions are framed as scenario planning while authorities monitor the low-cost carrier's financial health, which has been hit by a sharp rise in jet fuel prices and currency losses. Both legacy carriers indicated they would only consider a large-scale takeover if they could also take on AirAsia's aircraft leases, noting that assuming routes without planes would be impractical.

AirAsia commands roughly 60% of Malaysia's domestic flights, making its challenges a significant policy concern. The airline has reported a net loss for the second quarter and is seeking up to US$1 billion in debt market financing plus local credit facilities, while also cutting costs through fleet reductions and route rationalisation.