AirAsia's money-losing Indonesian unit is facing fresh headwinds after the country's transportation ministry took the unusual step of ordering the airline to raise as much as $225 million of funding quickly.
"It's a black swan event," said Mohshin Aziz, an airline analyst at Maybank-Kim Eng. "No country in the world has ever done this."
Indonesia's transportation ministry has ordered 13 airlines to raise funds to reach positive equity positions out of a concern that negative equity will affect safety oversight, according to media reports. Of the 13, only AirAsia is publicly listed, and in a filing to Bursa Malaysia, Malaysia's stock exchange, the company confirmed Tuesday that its 49-percent-owned Indonesian associate received a letter requiring it to reach the positive equity position by July 31.
That would likely mean raising more than 3 trillion rupiah ($224.8 million) by the deadline. AirAsia's shares dropped as much as 15.4 percent in intraday trade in Malaysia Wednesday, tapping its lowest levels since 2010, during the European debt crisis.
"There's no chance anybody can meet that deadline," Aziz said. "It's a festive month. Muslims are just about to go for holiday next week. You can't get any deals done this month, let alone find 3 trillion rupiah to comply with the regulation."
Phone calls to Indonesia's transportation ministry went unanswered and emailed requests for comment weren't immediately returned.
But if the directive is enforced, the risks for the carrier are high.
"Indonesia AirAsia (IAA) is at risk of losing its license," Raymond Yap, an analyst at CIMB, said in a note Tuesday. "Should the ruling be enforced, it would be hugely negative to AirAsia as IAA may have to suspend or permanently shut down operations while AirAsia would have no hope of recovering its debt from IAA and would be left with 29 planes to find a home for."
AirAsia Indonesia said it was in "active discussion" with Indonesia's transportation ministry to meet its directives.
"AirAsia Indonesia's operation remains as per normal and suggestions that our operational license will be called into question [are] not accurate. The level of our equity has never been an issue as the company has been fully funded through a variety of sources," Sunu Widyatomoko, president director of AirAsia Indonesia, said Wednesday in a statement which emphasized the carrier's importance to bringing international tourists into the country.
While the parent company "easily" has enough cash on its balance sheet to meet the directive, it would take at least two months to prepare an emergency general meeting to gain shareholder approval to transfer the funds to the Indonesian associate, Aziz said.
It isn't clear whether the directive will be enforced.
"We believe AirAsia is actively lobbying the Indonesian government not to enforce the ruling, which will result in a loss of 2,000 jobs and entrench Lion Air's market dominance," Yap said. "At the very least, IAA may be given more time to comply with the ruling. A possible cabinet reshuffle before end-July may yet give hope that the ruling will be abandoned."
Aziz also expects the directive may be abandoned.
"Why would a government be so hasty to put this into the throats of so many airlines, which consequently leads to the loss of tens of thousands of jobs during the festive, joyous month of Eid," Aziz asked." The president will probably intervene."
IAA and Batik Air are the largest of the 13 carriers affected by the reported letter from the transportation ministry, accounting for around 10 percent of domestic capacity and around 23 percent of Indonesia-Southeast Asia routes in the first half of this year, JPMorgan said in a note Tuesday.
—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1