AirAsia shares plummet as probe threatens plans for India unit's IPO

AirAsia Group Bhd shares plunged on Wednesday after federal police in India filed a case against the airline on corruuption charges a probe that threatens to delay its India unit's IPO plans and international expansion.

The case has been also filed against Chief Executive Tony Fernandes and unit AirAsia India, is a fresh blow to the airline's embattled leader.

“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.

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 AirAsia India to fly international routes.

The CBI said it had searched five AirAsia locations in Delhi, Mumbai and Bangalore, seizing certain documents.

Shares in Asia's biggest budget airline slid as much as 10.6 % to a one-year low on Wednesday. Since the Malaysian general election on May 9, they have shed about 20 %, giving AirAsia a market value of roughly $2.5 billion.

By 0806 GMT, AirAsia shares were down about 8 %, while the broader Malaysian market was down nearly 3 %.

AirAsia 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”.

On Twitter, Fernandes did not directly address the accusations but complained about media who reported without fact-checking.

INDIA PLANS

AirAsia which was founded 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.

Png said AirAsia India's expansion had been too aggressive, resulting in losses doubling in the quarter ended March 31.

“This raises the possibility that AirAsia Group will need to inject more capital into AirAsia India, which may not sit well with AirAsia Group's investors,” she said.

AirAsia last week reported a record quarterly profit of 1.14 billion ringgit ($286 million), due in large part to the sale of a ground handling services unit.