Malaysia talks to rival airlines as it monitors AirAsia's financial health, sources say

KUALA LUMPUR/HONG KONG: Malaysia's government has asked Malaysia Airlines and Batik Air whether they could absorb AirAsia's domestic market share, said two people with knowledge of the matter, as part of what they described as scenario planning while authorities monitor the financial health of Southeast Asia's largest low-cost airline.

Discussions between the government and Malaysia Airlines and Batik Air have increased in recent weeks, the people said, amid growing concerns over financial pressures faced by AirAsia.

The airline has been hit by soaring jet fuel costs stemming from the U.S.-Israeli war on Iran that surged 66% in the second quarter from the prior quarter to an average of $183 a barrel.

The talks, which involve the finance ministry and state-linked airport operator Malaysia Airports Holdings Berhad (MAHB), are part of broader scenario planning around AirAsia's financial strains, the people said.