February 4, 2020
AirAsia said both Kamarudin and Fernandes have relinquished their respective executive posts effective immediately for two months, or until such other period that the company deem fit.
AIRASIA Group Bhd said its founders Datuk Kamarudin Meranun and Tan Sri Anthony Francis Fernandes have relinquished their executive posts as the budget carrier forms a committee to review the allegations against them.
Kamarudin is the airline’s executive chairman and Tony Fernandes is the chief executive officer.
AirAsia said both Kamarudin and Fernandes have relinquished their respective executive posts effective immediately for two months, or until such other period that the company deem fit.
AirAsia said Tharumalingam Kanagalingam has been appointed the acting CEO in the interim and a committee made up of non-executive independent board members has been set up. “The committee’s main objective will be to review the allegations therein so far as it concerns the AirAsia Group and to take any necessary action based on the review, ” it said in a statement.
In view of the current difficult economic circumstances facing the airline industry, the company said it would retain them as advisers during the two month period. “As advisers, they will not have executive authority within the group.” According to Bernama, they would be redesignated as non-independent non executive board members of AirAsia Group Bhd.
AirAsia Group was mentioned in the approved judgment and the statement of facts in relation to Regina v Airbus SE, dated Jan 31,2020.
The company, in a previous statement, had denied corruption and bribery allegations against it, saying it was neither involved with the UK Serious Fraud Office (SFO) investigation of Airbus nor given any opportunity to provide any information or clarification to the SFO.
The UK SFO allegations concerned a 2012 US$50mil sponsorship between Caterham Formula 1 racing team, which was founded by Tony Fernandes, and Airbus’s former parent, EADS.
Shares in AirAsia Group Bhd’s slid 10.5% or 15 sen to RM1.28, following news of corruption allegations over the weekend and the negative impact of the worsening Wuhan coronavirus.
According to Kenanga Research, while it may appear that AirAsia may have a credible and defensible case, the group will have to bear the misfortune of a sell-off in its shares on concerns of legal action being taken as a result of Malaysia Anti-Corruption Commission’s (MACC) investigation.
“If so, not only at risk is the potential financial damage but perhaps more importantly, its brand value and hitherto good standing – in particular that of Tony Fernandez himself.
“It cannot be ascertained yet when the MACC will complete the investigation.
“It could all end well eventually but until they do, we will continue to value AirAsia at the low end of its historic five-year valuation range, at -1 standard deviation below historical forward average, ” said Kenanga Research.
The research house added that should AirAsia take legal action and seek compensation from Airbus for the damage done to its reputation arising from this controversy, the move should be welcomed as a vote of confidence.
TA Securities opined that the probe against AirAsia will not have any substantial financial impact on the company.
However, the fear of coronavirus outbreak would possibly deter travel sentiment despite Visit Malaysia Year 2020.
“We factor in the impact of coronavirus on the airline industry by reducing AirAsia and its affiliates’ load factor by 3 percentage points for financial year 2020.
“This is after taking into account confirmed coronavirus cases in AirAsia’s major operating hubs except Indonesia, the declaration of public health emergency by various countries, as well as the provision of refunds for passengers travelling to China by airlines, ” said TA Securities.
AirAsia has clarified that its aircraft purchase decisions from Airbus were never premised on sponsorships and its sponsorship of Caterham F1 was properly conducted via due internal assessment and approvals before being considered and approved by the board.
AirAsia further stated that aircraft purchase agreements were a collective board’s decision arrived at after careful evaluation and deliberation.
This entails account technical specifications, flight performance and operating economics besides superior reliability and attractive pricing.Below is a joint statement from Datuk Kamarudin Meranun and Tan Sri Tony Fernandes:We refer to the press announcement made by AirAsia on 01 Feb 2020 in relation to allegations made against us in the “Airbus’ Deferred Prosecution Agreement”. This Agreement and the contents were arrived at without any reference to us; neither were any explanations sought from us. This is in clear violation of fundamental legal principles of fairness.We categorically deny any and all allegations of wrongdoing or misconduct on our part as directors of AirAsia. We would not harm the very companies that we spent our entire lives building up to their present global status.So as to facilitate a full and independent investigation by AirAsia, we are relinquishing our executive roles with immediate effect for a period of two months, or such other period that the companies may deem fit.We will nonetheless continue to assist AirAsia in an advisory capacity as and when required.Finally, we welcome any investigations by the authorities and will extend our fullest cooperation.Datuk Kamarudin Meranun & Tony Fernandes