Tycoon Tony Fernandes bought AirAsia from the Malaysian government for less than a dollar two decades ago. He turned the failing company into south-east Asia’s largest budget airline. At the 2018 peak, a single share was worth more than that single greenback. The price is now just 16 cents.

Auditor EY has cast doubt on AirAsia’s ability to continue as a going concern. Covid-19 is the proximate cause. The perennial overcapacity of the airline industry made AirAsia vulnerable in the first place. Only consolidation can fix that.

AirAsia’s current liabilities already exceeded assets by $430m at the end of last year. It hopes investors will now stump up $327m in new capital and that lenders will roll over loan facilities. But that will not be nearly enough in a prolonged demand dip. The airline is expected to need at least $500m just to get through this year.

The real damage has yet to surface. AirAsia did not cut flights until the end of March. Even so, the first quarter ended with a $188m loss.

The latest crunch highlights Malaysian aviation’s long struggle with chronic overcapacity. Malaysia is not populous. But it has three airlines. Previous support from a sovereign fund for flag carrier Malaysia Airlines did nothing to fix the problem.

That could be one reason the Malaysian government has ruled out bailouts for airlines hurt by coronavirus. The slow resumption of full air travel prevents any swift return to profitability.

The problem is worst for a budget carrier reliant on cramming in passengers. AirAsia operated at a seat occupancy of near 90 per cent at its peak. Shares are down more than three-quarters in the past year and trade below book value, reflecting a grim outlook for the business.

Mr Fernandes, majority shareholder of Queens Park Rangers football club in the UK, is a deal doer. But ownership restrictions impede a buyout or merger of AirAsia involving a foreign partner. The best hope for the business is a cost-saving combination with Air Malaysia, or local rival Malindo Air.