Fernandes, 59, a pioneer of Southeast Asia's budget carrier sector who is often compared to British tycoon Richard Branson, said in January that he intended to step aside within the next five years after more than two decades at the helm.
But Capital A, which operates budget airline group AirAsia, said in a statement he had signed a new five-year contract.
Fernandes said he was "excited to embark on the journey of completing the full transformation of Capital A."
The firm said it had approved an incentive package but did not reveal details.
The flamboyant Fernandes shook up Southeast Asian air travel with his carrier's slogan "Now everyone can fly", offering cheap tickets that gave the opportunity to the region's 650 million people to fly for the first time.
The former record industry executive took over loss-making AirAsia shortly after the September 11 attacks in the United States, which sent the global aviation industry into a tailspin, and was given little chance of succeeding.
He bought the airline, which had only two aircraft and was 40 million ringgit ($13.4 million) in debt, for the token one ringgit, and mortgaged his house to pour money into the carrier.
It has since been credited with starting a revolution in regional air travel.
