KUALA LUMPUR: Low-cost carrier AirAsia X Bhd is paying a steep price for its wrong-way bet on jet fuel.
Management’s decision not to hedge when oil was cheap has backfired after the Iran war, and the company is now the worst-performing airline stock in the world.
The Kuala Lumpur-based carrier at one point lost almost half its market capitalisation in the days since the US and Israel started firing missiles at Iran, according to shares tracked by the Bloomberg World Airlines Index.
The stock rebounded around 13% today after oil prices retreated from an earlier spike.
CEO Bo Lingam was scheduled to meet with the media on Monday to discuss the airline’s outlook for 2026.
However, the event was postponed late Sunday night, with the company citing “unforeseen circumstances”.
The epicentre of the war is far away from AirAsia X, but the ripple effects on the industry are being felt globally.
Other Asian carriers that don’t hedge are also feeling the pain.
Shares of Shanghai-based China Eastern Airlines Corp and Korean Air Lines Co have both tumbled around 14% since the war began.
Jet fuel typically accounts for about one-third of an airline’s operating costs.
Carriers in Southeast Asia are being pinpointed as the most fragile amid discussions of grounding aircraft should elevated oil prices persist.
The Singapore jet-fuel spot price soared to as much as US$221 a barrel last week.
European carriers typically hedge part of their consumption, but most US counterparts have no hedges, according to BloombergNEF.
Maybank analyst Samuel Yin Shao Yang said in a March 5 note that elevated fuel prices would push AirAsia X to swing to a RM1.4 billion (US$353 million) loss from an earlier estimate of a RM900 million net profit.
“The carrier could “neutralise” the impact by raising fares 19%, but that would come at the expense of bookings,” he said.
The budget carrier introduced fuel surcharges to help recoup the costs of jet fuel, though an executive said the airline “assures” that it’s temporary.
The airline “continues to reaffirm its commitment to keeping fares affordable for travelers as a leading low-cost carrier, and states that it will review the surcharges as market conditions evolve,” according to a statement attributed to deputy group CEO Farouk Kamal.
AirAsia X now consists of all aviation businesses from parent Capital A Bhd, merging the carrier’s short- and long-haul operations.
The company has 250 aircraft in its fleet and almost 400 planes on order.
The airline was close to finalising an agreement for 150 more single-aisle regional jets, prior to the outbreak of the war.
AirAsia is among carriers that started to rethink the timing of large jet purchases, Bloomberg News reported earlier.
The war has exposed AirAsia in other ways. It announced in February a plan to start a Middle East hub in Bahrain – but the island nation has been pulled into the conflict and its airspace remains closed.
