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🇸🇬 Singapore /Economy & Trade

AirAsia X Co-Founder Plans New Airline Amid Industry Volatility, Defends No-Hedging Stance

From The Straits Times · (1h ago) English Mixed tone

Translated from English, summarized and contextualized by DistantNews.

TLDR

  • AirAsia X co-founder Tony Fernandes plans to launch a new airline, aiming to expand during a volatile period in the aviation industry.
  • The new airline's announcement is expected within two months, with the company also planning a significant bond sale and refinancing loan to fund expansion.
  • Despite industry challenges like high oil prices, Fernandes remains defiant on the company's decision to avoid fuel hedging, expressing optimism about future oil price trends.

AirAsia X co-founder Tony Fernandes is charting a bold course, preparing to launch a new airline even as the global aviation sector grapples with soaring oil prices. Fernandes, speaking from Montreal, views the current turbulence not as a deterrent but as an opportunity, a sentiment that echoes the group's history of unconventional strategies. This expansionist vision comes alongside a substantial order for 150 Airbus A220 aircraft, signaling a commitment to smaller, more agile planes suited for the diverse Asian market.

Why waste a crisis? There are opportunities in a crisis.

— Tony FernandesFernandes explains his strategy of expanding during a volatile period in the aviation industry.

Fernandes remains steadfast in his decision to forgo fuel hedging, a strategy that has drawn criticism and contributed to a dip in AirAsia's share price. He argues that while short-term hedging might seem profitable, it rarely pays off in the long run. His confidence in a future decline in oil prices underpins this defiant stance. This approach, while risky, reflects a deep-seated belief in the resilience and future growth potential of the Asian aviation market, a perspective that often contrasts with the more risk-averse strategies seen in some Western markets.

We can’t control what happens in the Middle East, but we have to take a view that it’s not going to last for two years.

— Tony FernandesFernandes discusses the uncertainty of global events and his company's long-term outlook.

To finance these ambitious plans, AirAsia is preparing to raise up to US$600 million through bond sales and is in discussions for a significant refinancing loan. Fernandes is also actively seeking investment from Canadian pension funds. While acknowledging the likelihood of short-term financial headwinds and a potential miss on initial profit targets, the airline group maintains its revenue projections. The group's expansion also includes exploring new bases, such as Vietnam, and launching operations from Bahrain to establish a presence in the Gulf region. This multi-pronged strategy underscores AirAsia's aggressive growth ambitions in a dynamic and evolving industry.

Obviously people who hedge now are in the money, but over a longer period, hedging never really works.

— Tony FernandesFernandes defends his company's decision to avoid fuel hedging.
DistantNews Editorial

Originally published by The Straits Times in English. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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