UPDATE 1-AirAsia has grounded around 90% of fleet amid COVID-19 surge -exec

* Largest market of Malaysia is under lockdown

* Demand could start to rebound from August-exec

* Return to pre-COVID demand not expected until Q3 2022 (Adds forecast for return to normal travel, funding details)

June 9 (Reuters) - AirAsia Group Bhd has grounded around 90% of its fleet of more than 200 planes across Asia due to resurgence of COVID-19 outbreaks, an executive at its Malaysia unit said on Wednesday.

Malaysia, its largest market with 105 planes, is currently under lockdown.

AirAsia Malaysia expects demand could start to rebound from August, allowing it to restore service to all 17 of the domestic airports it serves by October, Chief Operating Officer Javed Anwar Malik said at a CAPA Centre for Aviation event on Wednesday.

A full return to pre-COVID demand levels across Asia is not expected until around the third quarter of 2022, he said.

AirAsia Group last month reported its seventh consecutive quarterly loss and said it was continuing efforts to secure more liquidity.

Passengers carried in the quarter ended March 31 totalled 976,968, a 90% drop from a year ago. (Reporting by Jamie Freed in Sydney; editing by Jason Neely and Louise Heavens)