News
AirAsia group shares decline, Fernandes and Kamarudin step aside during government investigation into bribery allegations
February 7th 2020
Shares in Malaysia-listed low-cost carrier (LCC) AirAsia Group Bhd fell heavily this week after co-founder and group CEO, Tony Fernandes, and the group’s chairman responded to an Airbus bribery scandal. Read More »
The bribery claims emerged in a deal between Airbus and France, the United Kingdom and United States, with the original equipment manufacturer (OEM) agreeing to pay US$4 billion in fines to settle a four-year investigation. In Malaysia, the country's Anti-Corruption Commission has commenced an investigation.
Fernandes and executive chairman, Kamarudin bin Meranun, said they would step aside from the group for two months. AirAsia said in a statement on February 1 it would "fully cooperate with the Malaysian Anti-Corruption Commission and the relevant authorities where required”.
AirAsia noted the deferred prosecution agreement between Airbus and the United Kingdom Serious Fraud Office (SFO) "allege that certain agreements by AirAsia to order Airbus aircraft were improperly linked to sponsorship by Airbus of a sports team jointly owned by AirAsia executives".
"AirAsia vigorously rejects and denies any and all allegations of wrongdoing," the company said.
"As a customer of Airbus since 2005, AirAsia never made purchase decisions that were premised on an Airbus sponsorship.
"We also wish to emphasise that all negotiations and dealings leading to the signing of any aircraft purchase agreement have been undertaken directly with Airbus on an arm’s length basis and without the involvement of any third parties or intermediaries."
Fernandes and Kamarudin said in a separate statement the sports team in question, the Caterham Formula One racing team, had "made no profit" while the pair was shareholders and was "eventually disposed for £1 in 2014".
Shares in AirAsia tumbled 19 per cent to a low of MYR$1.15 (US$0.28) at the close of trade on the Bursa Malaysia on February 4, from MYR$1.43 on January 31. The stock has since recovered slightly.
TA Securities analyst, Tan Kam Meng, noted AirAsia said it was not involved with the SFO investigation of Airbus and was not offered the opportunity to provide any information or clarification to investigators.
"However, we choose the 'sell first, ask questions later' approach to avoid the uncertainty in association with the corruption investigation by MACC, where the impact on AirAsia could be significant in terms of corporate governance issues," Tam said in a research note of February 3 and posted on the Bursa Malaysia website.
TA Securities downgraded the stock to "sell", from a previous "buy", citing fear the coronavirus outbreak would possibly deter travel sentiment.
Meanwhile, Sri Lanka’s prime minister, Gotabaya Rajapaksa, said his government was investigating the SFO report's claim that the wife of a SriLankan Airlines executive was hired by Airbus as part of negotiations over aircraft deals.
Kuwait authorities also announced their intention to investigate allegations of bribery in the nation’s aviation industry.
