KUALA LUMPUR — Putrajaya has asked Malaysia Airlines and Batik Air whether they could absorb AirAsia’s domestic market share as authorities monitor the financial health of the country’s biggest low-cost carrier, two people familiar with the matter told Reuters.

The discussions, which have increased in recent weeks, are part of scenario planning involving the Finance Ministry and state-linked airport operator Malaysia Airports Holdings Bhd (MAHB), as concerns grow over AirAsia’s financial pressures, the news agency reported.

According to the report Malaysia Airlines and Batik Air have told the government they would be willing to expand organically to take on AirAsia’s routes and passengers rather than acquire its entire business, one of the people said.

However, they would only consider taking over AirAsia’s operations on a large scale if they could also assume its aircraft leases, as absorbing its routes and passenger volumes without the aircraft would be considerably more difficult, the source said.

AirAsia has said it accounts for about 40 per cent of Malaysia’s overall aviation market and 60 per cent of domestic flying, making its financial position a significant concern for the government, according to the people Reuters spoke to. 

AirAsia has been hit by soaring jet fuel costs stemming from the US-Israeli war on Iran, with costs rising 66 per cent in the second quarter from the previous quarter to an average of US$183 a barrel.

AirAsia reported a net loss of RM831 million for the quarter ended June 30, including RM331 million in foreign-exchange losses. Its current liabilities stood at RM18.4 billion as of June 30, according to Reuters.