AirAsia’s deals with Airbus in focus as CEO Tony Fernandes steps aside

AirAsia, the discount carrier built by Malaysian Tony Fernandes, and Airbus SE were inseparable for years, with the boisterous aviation executive gorging on ever-larger aircraft orders to become the manufacturer’s single biggest customer for single-aisle jets. That happy marriage ended in acrimony last week after Airbus admitted to illegally trying to sway decision makers in aircraft sales and agreed to a record US$4 billion bribery settlement. By Monday, Fernandes was out of the Malaysian airline he had acquired in 2001 and turned into a success. Shares of AirAsia fell 5 per cent as the stock market opened in Kuala Lumpur on Tuesday. Those of long-haul subsidiary AirAsia X Bhd lost 8 per cent. Fernandes, 55, was one of Airbus’ most loyal customers, a fixture at air shows where he would make a splash with massive orders. Among his most memorable moments was in 2014, when he signed Airbus’ biggest deal at that year’s Farnborough expo and proceeded to exchange kisses and man-hugs with the European company’s legendary, since departed sales chief, John Leahy. Now the corruption probe which has ricocheted through Airbus for almost four years, and already claimed the scalps of many of its senior staff, is coming for its airline counterparts. India police investigate AirAsia boss Tony Fernandes in bribes probe Fernandes will leave his role as chief executive officer of AirAsia for two months while the government probes corruption allegations, according to a statement on Monday. Chairman Kamarudin Meranun also stepped down, in a growing sign of further repercussions from the long-running bribery case. “AirAsia is clearly a major Airbus customer,” said Sash Tusa, an aerospace and defence analyst at Agency Partners in London. “If there has been any impropriety it gives the AirAsia board much greater leverage to reconsider or change those orders.” Prosecutors at the Britain’s Serious Fraud Office (SFO) said the European planemaker paid US$50 million in sponsorships to a sports team jointly owned by two AirAsia executives as a reward for an order of 180 aircraft, later amended to 135. The July 2014 deal in Farnborough that produced such fraternal bonhomie – for 50 A330-family wide-bodies – was supposed to trigger an additional US$55 million payment, according to the prosecutors, though the money was never received. AirAsia’s Fernandes, who is already facing corruption charges in India, and Meranun on Monday denied allegations of wrongdoing. They are still AirAsia’s biggest investors through Tune Group. Malaysia’s anti-corruption agency said on Saturday it was looking into corruption at AirAsia. Airbus, which admitted to the SFO’s allegations as part of its settlement, declined to comment. The executives and the sports team were not named in the case, but AirAsia over the weekend called the sponsorship “a well-known and widely publicised matter bringing branding and other benefits to Airbus”. Fernandes and Meranun, together with Nasarudin Nasimuddin, chairman of car assembler Naza Group, founded the Caterham Formula One Team in motor racing in 2009, later counting Airbus among its sponsors. By 2015, the team started auctioning its assets after failing to find a buyer. The second sponsorship payment started to teeter shortly after it was announced in July 2014. Four days later, an AirAsia executive emailed a senior Airbus employee saying that “instead of sponsorship we want to put it as a grant”, according to the prosecutors. Airbus to stop making A380, world’s biggest passenger jet The A330 order was finalised in December that year, but by then the strategy and marketing department at the centre of the Airbus corruption was no longer in a position to fulfil its commitments, prosecutors said. “We have kept our side of the deal,” the AirAsia executive emailed. “Pls don’t let us down.” In all, corruption boosted profit by more than US$1 billion at Airbus, prosecutors said in court documents. The repercussions from the scandal have already reached across the globe. Colombia’s Avianca Holdings SA said on Monday it had retained a law firm to conduct an independent internal investigation into the carrier’s relationship with Airbus, and whether it was the victim of wrongdoing. In Sri Lanka, prosecutors are seeking the arrest of the state-owned airline’s former top boss and his spouse. The attorney general’s office said Kapila Chandrasena, the ex-CEO of Sri Lankan Airlines, and his wife, Priyanka Niyomali Wijenayaka, were suspects in a money-laundering case linked to aircraft sales at Airbus. Sri Lankan police were ordered to obtain an arrest warrant, according to a statement Monday. Chandrasena did not respond to multiple calls seeking comment. Without naming anyone in published documents, the British SFO alleged that the wife of a Sri Lankan Airlines official received a US$2 million bribe through a Brunei shell company to secure an aircraft order. The SFO also alleged that Airbus misled UK Export Finance, with email exchanges showing the funding agency realised the intermediary contracted by the company had the same name as the wife of the airline executive, which Airbus dismissed as a coincidence, saying the person was a man. UKEF was not satisfied with the explanation, prompting an Airbus employee to email another saying “the truth is most unfortunate.” Airbus withdrew its application from UKEF in March 2015. On the first of April, the British agency reported the company to the SFO. Additional reporting by Reuters