According to Hong Leong Investment Bank (HLIB) Research, the anticipated downturn in 2Q26 performance is linked to a combination of factors, including a sharp increase in jet fuel prices, weaker travel demand, and US dollar appreciation triggered by heightened geopolitical tensions during the Iran conflict.
Despite the expected short-term pressure, the research house maintained that the airline’s financial position remains stable enough to withstand losses without falling into regulatory distress.
“AAX’s balance sheet should still be able to absorb the expected losses (avert Practice Note 17 status), supported by its positive shareholders’ equity of RM872.5mil (as at March 2026),” HLIB Research stated.
The firm further noted that the airline may begin to see margin relief as early as June, driven by a mismatch between earlier ticket pricing and falling fuel costs.
“In addition, AAX is likely to benefit from margin expansion in June, as ticket sales were largely priced based on US$160 per barrel jet fuel prices, while actual jet fuel prices have since declined to below US$120 per barrel,” the report added.
On the geopolitical front, market sentiment has improved following reports that the United States and Iran have reached a peace agreement to end hostilities that escalated in late February, with a formal signing ceremony reportedly scheduled for June 19, 2026 in Switzerland.
The easing of tensions has contributed to a broader decline in energy prices. Brent crude currently trades at around US$83 per barrel, while jet fuel prices have retreated significantly from earlier peaks of US$220 per barrel in March to below US$120 per barrel.
HLIB Research said the lower fuel cost environment is broadly positive for airlines, with AirAsia X expected to be one of the key beneficiaries as operating margins recover in the coming quarters.
Looking ahead, the airline’s operating environment is expected to stabilise further, with stronger performance projected toward the traditionally high-demand travel period in the fourth quarter of 2026.
The research house maintained its “buy” recommendation on AirAsia X, keeping its target price unchanged at RM2.20 per share, citing improving cost dynamics and expected demand recovery as key catalysts for the stock.