AirAsia shares tumble as probe threatens plans for India unit's IPO; CEO Tony Fernandes says reportage is 'inaccurate'

Singapore/Kuala Lumpur: Air Asia Group Bhd shares dropped sharply on Wednesday after federal police in India filed a case against the airline accusing it of corruption - a probe that threatens to delay its India unit’s IPO plans and international expansion. The case, also filed against Chief Executive Tony Fernandes and unit Air Asia India, is a fresh blow to the airline’s embattled leader, who has been under fire for supporting Malaysia’s former prime minister and is being investigated over the cancellation of flights during the general election period. “The (India) investigations could be long-drawn and will de-rail AirAsia India’s plans to launch international flights from next year and defer its IPO targets too,” said Corrine Png, CEO of Singapore-based transport research firm Crucial Perspective. The Central Bureau of Investigation (CBI) accused the airline, some of its employees and third parties of violating foreign direct investment rules while obtaining its licence to fly, and of bribing government officials in an attempt to get regulations relaxed to allow Air Asia India to fly international routes. The CBI said it had searched five Air Asia locations in Delhi, Mumbai and Bangalore, seizing certain documents.

Shares in Asia’s biggest budget airline slid 6 percent to a six-month low on Wednesday. Since the general election on May 9, it has lost roughly 16 percent, giving it a market value of roughly $2.6 billion. Malaysia’s broader market was down 2.5 percent.

Air Asia India, a venture with India’s Tata Sons conglomerate, said in a statement on Tuesday it refuted any allegations of wrongdoing and was co-operating with all regulators and agencies “to present the correct facts”. Air Asia on Wednesday referred requests for comment to Air Asia India. On Twitter, Fernandes did not directly address the accusations but complained about media who reported without fact-checking.

A majority shareholder in British soccer team Queens Park Rangers, he also tweeted video of himself playing a virtual reality soccer game.

He did not respond to a Reuters request for comment. The flamboyant CEO, who co-founded Air Asia in 2001 with two aircraft, announced plans for an IPO for the India unit in January, part of a series of strategic moves to monetise assets. AirAsia India had 14 planes at end-2017, and has plans to expand its fleet to 60 over the next five years. Under Indian rules, it can launch international flights once it has 20 planes. [caption id=“attachment_4488373” align=“alignleft” width=“380”]  Air Asia Group CEO Tony Fernandes. Reuters[/caption] Png said Air Asia India’s expansion had been too aggressive, resulting in losses doubling in the quarter ended 31 March. “This raises the possibility that Air Asia Group will need to inject more capital into Air Asia India, which may not sit well with Air Asia Group’s investors,” she said. Air Asia last week reported a record quarterly profit of 1.14 billion ringgit (216 million pounds), due in large part to the sale of a ground handling services unit. Since the election, Fernandes has apologised for endorsing former prime minister Najib Razak in the election, saying he buckled under government pressure. Malaysian police are investigating Fernandes at the request of regulatory body, the Malaysian Aviation Committee, which has denied Fernandes’ accusations that it ordered the airline to cancel 120 flights during the election period. Fewer flights would have made it more difficult for Malaysians abroad to fly home to vote.