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Author: Tan KW   |   Latest post: Fri, 21 Feb 2020, 9:54 AM

 

South Korea Covid-19 cases soar to 156

Author: Tan KW   |  Publish date: Fri, 21 Feb 2020, 9:54 AM


SEOUL: South Korea confirmed 52 more cases of Covid-19 coronavirus on Friday, taking its overall figure to 156 and making it the worst-infected country outside China.
 
Altogether, 39 of the new cases were linked to the Shincheonji Church of Jesus in the southern city of Daegu, the Korean Centres for Disease Control and Prevention said.
 
More than 80 members of Shincheonji have now been infected, starting with a 61-year-old woman who developed a fever on February 10 but attended at least four church services before being diagnosed.
 
The mayor of Daegu – South Korea’s fourth-biggest city, with a population of over 2.5 million – has advised residents to stay indoors, and commanders at a major US base in the area restricted access.
 
Residents wore masks to go about their daily activities on Friday.
 
Shincheonji is often accused of being a cult and claims its founder, Lee Man-hee, has donned the mantle of Jesus Christ and will take 144,000 people with him to heaven on the day of judgement.
 
The KCDC said one more case had been confirmed at a hospital in Cheongdo county near Daegu where a total of 16 infections have now been identified, including a long-stay patient who died on Wednesday after showing symptoms of pneumonia.
 
 
 - AFP
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Streamlining internal processes enabled us lead OTP performance in January: AirAsia India CEO

Author: Tan KW   |  Publish date: Fri, 21 Feb 2020, 9:54 AM


New Delhi, Feb 20 Streamlining internal processes has enabled AirAsia India to achieve top spot in on-time performance (OTP) at four metro airports in January, its CEO Sunil Bhaskaran said on Thursday.

 

New Delhi: Streamlining internal processes has enabled AirAsia India to achieve top spot in on-time performance (OTP) at four metro airports in January, its CEO Sunil Bhaskaran said on Thursday. With 75.7 per cent, AirAsia India was number one in on-time performance measured at four metro cities -- Bengaluru, Delhi, Hyderabad and Mumbai -- according to data released by the aviation regulator on Monday.

IndiGoNSE -1.14 % at 74 per cent and Vistara at 70.2 per cent were number two and three respectively on OTP performance at these four cities.

"We're delighted that our efforts to streamline processes and our relentless focus on being guest obsessed have enabled us to achieve category leadership on the key industry metrics for on-time performance, complaint ratios and cancellation percentage," Sunil Bhaskaran, CEO and MD, AirAsia India, said on Thursday.

In the first 11 months of 2019, GoAir was the number one in OTP performance while in December, IndiGo was on the top slot. In five months of 2019, AirAsia India was at number two position on OTP performance parameter.

 

https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/streamlining-internal-processes-enabled-us-lead-otp-performance-in-january-airasia-india-ceo/articleshow/74228645.cms

Labels: AIRASIA
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AirAsia Philippine expands to GenSan

Author: Tan KW   |  Publish date: Fri, 21 Feb 2020, 9:53 AM


AirAsia announced its newest destination in Southern Philippines, General Santos City. Beginning March 29, guests can fly to General Santos from Clark and Cebu.

“We are pleased to announce our new domestic destination for the year, General Santos. Our General Santos flights will provide access to Mindanao, a beautiful region rich in culture and history. I am confident that Air-Asia’s announcement of these new flights will contribute to local tourism and the economy,” AirAsia Philippines CEO Ricky Isla said.

“We are committed to growing our domestic connectivity this year, and you can expect more exciting destinations to be announced later in 2020,” he added.   

To celebrate its newest route, AirAsia is offering all-in promotional fares from Clark to General Santos from as low as P1,090 for BIG Loyalty members and P1,157 for non-members, and fares from Cebu to General Santos from as low as P990 for members and P1,057 for non-members.

General Santos is known for being the Tuna Capital of the Philippines. The city is outside of the typhoon belt and has a high export rate of various crops to different parts of the world. 

Enjoy the lowest possible fares by becoming a BIG member for free. Simply visit airasia.com and click “BIG Log in/Sign up.”

Since its inception in 2001, AirAsia has become one of the largest airline groups in the world, with over 600 million guests flown and more than 160 destinations in its network – including across Asia, Australia and the US.

AirAsia guests are encouraged to check-in online at airasia.com, via the AirAsia mobile app, or by using our self-service kiosks at airports. Travelers who wish to make changes to their bookings or purchase additional add-ons such as pre-booked Santan meals or luggage can do so via the My Bookings portal at airasia.com.

 

https://www.philstar.com/lifestyle/travel-and-tourism/2020/02/21/1994736/airasia-expands-gensan

Labels: AIRASIA
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Edge Weekly Cover Story: AirAsia, Airbus & a failed F1 Racing Team

Author: Tan KW   |  Publish date: Fri, 21 Feb 2020, 9:52 AM


AN AirAsia executive chided a senior Airbus employee for not paying US$16 million he said was owed to him and demanded US$30 million in sponsorship before placing more aircraft orders, according to internal emails released by the UK Serious Fraud Office (SFO) on Jan 31.

“I’m fed up. You owe me (US$) 4 million already and I’m owed (US$)16 million in total. This should have been paid ages ago when I bought the first 60 aircraft. I want my money and I want compensation ... pay up. I want my whole (US$)16 million now,” AirAsia Executive 1 said in a July 15, 2010, email to Airbus Employee 1 (senior).

Other email exchanges released by the SFO involved conversations among Airbus employees in which they discussed how to pay US$50 million as sponsorship for a sports team jointly owned by two AirAsia executives, but that was legally unrelated to AirAsia Group Bhd (AAB) and its long-haul sister airline AirAsia X Bhd (AAX).

They also offered to pay the AirAsia executives an additional US$55 million if AAX placed more aircraft orders. On Nov 24, 2014, a contract was signed and on Dec 15, 2014, AAX confirmed an order for the purchase of 55 A330-900neo aircraft.

In another set of emails, the Airbus employees appear to discuss paying US$3 million to the sports team.

“[Airbus employee 1 [senior]] as discussed yesterday, please can you pay immediately. It will help me close my deal,” one employee said to a colleague in an email exchange on Feb 9, 2011. On Feb 24, 2011, a payment of US$3 million was made to the sports team.

The release of the email communications follows a four-year investigation by the SFO, which started in 2016, into Airbus’ use of middlemen to secure plane deals in Sri Lanka, Malaysia, Indonesia, Taiwan and Ghana between 2011 and 2015. According to news reports, the investigation was launched after Airbus discovered inconsistencies in disclosures made about external consultants.

The European aircraft maker has since agreed to pay €3.6 billion (US$4.0 billion) in a global bribery settlement with French, British and US authorities.

However, the statement of facts published alongside the British court’s approved judgment has led to countries such as Ghana, Colombia and Sri Lanka launching investigations into the Airbus dealings.

In Malaysia, three agencies have launched their own investigations or reviews on the allegations against the two executives from AirAsia — not named but recognised to be Tan Sri Tony Fernandes and Datuk Kamarudin Meranun — the two controlling shareholders of AirAsia and driving force behind its rise.

The Malaysian Anti-Corruption Commission (MACC) is looking at the case from the aspect of alleged corruption, while the Securities Commission Malaysia (SC) is reviewing all available evidence to see whether the directors and/or employees of AAB and AAX may have caused wrongful loss to the listed companies under Section 317A of the Capital Markets & Services Act 2007 (CMSA). The Malaysian Aviation Commission (Mavcom), meanwhile, is assessing the fitness of the two executives in connection with their probity, integrity, competency and financial standing.

A Feb 6 report by The Edge Financial Daily, quoting sources, said the SC and Bursa Malaysia have started a probe into the matter, calling in independent directors of AAB and AAX, both existing and those who had served between July 2011 and June 2015 when the alleged bribery took place.

Fernandes and Kamarudin denied the allegations of wrongdoing but have stepped down from their executive positions for two months pending a resolution of the matter. They remain on the board. They also said they were never called by the SFO to explain anything.

“Caterham F1, the company alleged to have been sponsored improperly by Airbus, was at the relevant time a Formula 1 Racing team that had gone round the globe promoting among others AirAsia, AAX, GE and Airbus,” said Kamarudin and Fernandes in a joint statement on Feb 4.

“Throughout the period we were shareholders in Caterham, the company made no profits and was eventually disposed of for £1 in 2014. From start to finish this was a branding exercise and not a venture to make profits.”

Their response sounds familiar.

Recall that in 2016, then prime minister Datuk Seri Najib Razak had said that 1Malaysia Development Bhd (1MDB) was not directly involved in the US Department of Justice’s civil suit seeking to recover more than US$1 billion laundered through the US as the sovereign wealth fund was not approached for information by the latter. Najib also said the money that went into his account was a Saudi donation and that he never personally benefited from any of the money as they were used for political and social programmes.

Then attorney-general Tan Sri Mohamed Apandi Ali later cleared Najib of any wrongdoing despite the fact that globally, investigations into 1MDB in the US, Switzerland and Singapore continued.

AAB and AAX have separately formed committees comprising non-executive members of their respective boards, excluding Kamarudin and Fernandes, to review the bribery allegations and to take any necessary action based on the review, including the appointment of an independent expert.

No names were, however, disclosed in their press statements.

According to AirAsia’s 2018 annual report, its non-executive directors are Datuk Abdul Aziz Abu Bakar, Datuk Fam Lee Ee, Datuk Mohamed Khadar Merican, Stuart L Dean and Noor Neelofa Mohd Noor.

All, except Abdul Aziz, are independent directors. It is interesting to note that, while Fam is designated as a senior independent director of AAB, he is however classified as a non-independent director of AAX.

Abdul Aziz has been instrumental in assisting Fernandes, Kamarudin and Datuk Pahamin Ab Rajab with the acquisition of AirAsia, then a struggling domestic airline, in December 2001, and with the help of Conor McCarthy, a former Ryanair executive, relaunched it as a budget airline in Asia.

Fam, a partner at Messrs Gan & Zul, has been a director of AAB since March 2008. Mohamed Khadar, meanwhile, has more than 40 years of experience in financial and general management. Dean is a retired long-time executive of General Electric Co, while Neelofa is a Malaysian actress and celebrity entrepreneur.

Meanwhile, the current board of AAX comprises five non-executive directors, namely former international trade and industry minister Tan Sri Rafidah Aziz, Datuk Yusli Mohamed Yusoff, Lim Kian Onn, Tan Sri Asmat Kamaludin and Fam. Rafidah, Yusli and Asmat are independent directors.

AAX’s 2018 annual report shows that Rafidah has been chairman of the board since March 2011. Both Yusli, who was CEO of Bursa Malaysia Bhd between 2004 and 2011, and Asmat joined the AAX board in May 2013. Asmat was formerly secretary-general of the ministry of international trade and industry and is the father of Riad Asmat, CEO of AirAsia Malaysia.

 

Independent directors face daunting task

An independent director, who currently serves on the boards of two companies, says independent directors of AirAsia and AAX would have to look at the transparency of the sponsorship deal to the sports team.

A fundamental question would be ­whether the boards of AAB & AAX were informed of the arrangement, she says, adding that the committees set up to look into the matter must be seen to be independent and transparent.

A former independent director tells The Edge that the appointment of an independent expert to review the US$50 million payments to the sports team in respect of the order of 180 aircraft from Airbus would be best to avoid any conflict of interest.

He questions whether Asmat can be deemed independent as his son Riad is the current CEO of AirAsia Malaysia although he has not been implicated.

Minority Shareholders Watch Group (MSWG) CEO Devanesan Evanson concurs. He says the committee should leverage independent professionals, in the course of its review, to impart an independent flavour to the review process.

“This would enhance impartiality and remove the perception of bias,” he says in an email reply to The Edge.

“The committee must also bear in mind that there is no conclusive evidence as to the identity of the two AirAsia executives mentioned in the documents relating to the Airbus case — all speculation as to their identities is hitherto based on circumstantial evidence.

“In this context, the committee should give every opportunity to those alleged to have committed the offences to respond and to explain — the right of audience is a sacred limb of natural justice,” says Devanesan.

“The committee must be mindful at all times that perceptions need to be managed and in this context, be mindful of the importance and relevance of investor relations and timely dissemination of material information,” he adds.

In the coming two months, all eyes will be on the committees of the two airlines and what the outcome of their review will be, as well as the conclusions of investigations by MACC, the SC and Mavcom and whether they will take action.

On Feb 6, Kapila Chandrasena, the former CEO of SriLankan Airlines, was the first among those implicated by the SFO to be charged with money laundering and bribery after he and his wife were accused of receiving US$2 million in bribes over the purchase of Airbus planes. Kapila’s wife, Priyanka Niyomali Wijenayaka, was also arrested on money laundering charges.

Still, some quarters are of the view that Kamarudin and Fernandes will be cleared of the bribery allegations following Prime Minister Tun Dr Mahathir Mohamad’s remarks on Feb 6 that it was normal to ask for an “offset” in business dealings, provided the money is not taken for personal use.

Critics, however, said it was not proper of Mahathir to make comments that appeared to clear Kamarudin and Fernandes of any wrongdoings when investigations have not been completed. They also highlighted that the offset programmes he talked about were different from cash payments to a company owned privately by the two AirAsia executives.

The Prime Minister’s Office has since ­clarified that at no point did Mahathir suggest that the alleged bribery involving AirAsia was an offset payment. “Mahathir did not say that AirAsia was benefiting from this normal practice. He said it is only if the money goes to individuals that it becomes a bribe. If it is not for personal benefit, then it is not a bribe in his view.”

Many offset programmes originally came about as a result of defence and aerospace sales. However, in most cases, such offset programmes involve investment, skills training, transfer of technology and exports and not outright cash payments.

For instance, as part of Boeing’s industrial participation commitment in delivering new jets to Malaysia, it entered into offset programmes with Composites Technology Research Malaysia (CTRM) to supply ScanEagle hardware services in 2012 and with Aerospace Composites Malaysia to manufacture aileron composites for next-generation 737 jets in 2005.

 

‘AirAsia is Tony and Tony is AirAsia’

He is known as Asia’s equivalent of British billionaire Sir Richard Branson. While Branson is synonymous with the Virgin brand, Fernandes is the flamboyant entrepreneur behind the AirAsia brand.

The success witnessed by AirAsia Group today can be attributed to the 54-year-old Fernandes and Kamarudin, 57, who is often overshadowed by the former. Fernandes built a persona similar to Branson as well as Michael O’Leary, the boss of low-cost airline Ryanair. Like O’Leary, Fernandes is notorious for his regular outbursts against regulators, competitors and the media. Indeed, Fernandes’ aggressive push for the industry to embrace the low-cost travel model has many a time rubbed people the wrong way.

But whether Fernandes and Kamarudin will take a back seat permanently at the airline they had grown massively over the past two decades remains to be seen. In the interim, AirAsia’s deputy group CEO for airlines business, Tharumalingam Kanagalingam, better known as Bo Lingam, has been appointed acting CEO.

Like him or loathe him, Fernandes represents AirAsia, says Endau Analytics founder and aviation consultant Shukor Yusof.

“It would put a question mark over the airline’s future (if Fernandes were to step down from his CEO role) because Tony is the face of AirAsia in more ways than one … not just as a shareholder. (Although a co-founder,) Kamarudin was a more passive shareholder than Tony. Tony has always been the one [credited] with bringing AirAsia to where it is today,” says Shukor.

“Without him around, investors would have every reason to be concerned about the sustainability of the airline. He is the person who has set the direction for the airline and moulded it into the largest low-cost carrier in Asia today with his philosophy and management style. That’s why I say, ‘AirAsia is Tony and Tony is AirAsia.’ The two are inseparable.”

The release of the damning set of internal emails could not have come at a worse time for AirAsia, already struggling with the outbreak of coronavirus and a challenging operating environment, owing to intense competition and overcapacity. It also probably ended all hopes of a merger between it and Malaysia Airlines that has been under consideratiom.

AllianceDBS Research aviation analyst Siti Ruzanna Mohd Faruk expects the bribery allegations to raise some corporate governance concerns among investors until the issue is cleared by MACC and the SC.

“This may lead to some short-term share price volatility, exacerbated by the ongoing coronavirus concerns,” she writes in a Feb 3 note. “For the period from January to November 2019, we understand the available seat kilometres (which measures passenger carrying capacity) to China was about 13%. The group continues to fly to China. However, if the spread of the coronavirus prolongs, load factors could be adversely affected.”

In a report issued on Feb 5, S&P Global Ratings says its base-case projection is that the coronavirus crisis will stabilise globally in April 2020, with virtually no new transmissions in May.

“Our worst-case projection holds that the virus stops spreading in late May, and optimistically in March. In turn, this suggests that the peak impact on economic activity across Asia-Pacific will be in the first and second quarters. Growth should stabilise later in 2020 and recover through early 2021 as the temporary effect on activity wanes,” it adds.

MIDF Research analyst Adam Mohamed Rahim believes the recent corruption case allegedly involving AirAsia could be an overall sentiment dampener to the company, especially in an operating environment that is already facing headwinds.

“Operationally, we view that AirAsia’s efforts in its non-airline business, represented by Teleport, BigPay, AirAsia.com and RedBeat Ventures, to continue growing.

“But until the outcome of the investigation is known, precautions have to be taken in valuing the company as any adverse findings could pose an impact to the airline’s reputation and potential financial penalties. Nevertheless, if the allegations are found to be untrue, this will serve as a golden opportunity for both co-founders to strengthen their trustworthiness back in the company and subsequently, the airline industry,” he says in a Feb report.

Since the news on the Airbus corruption scandal broke, AirAsia’s share price has fallen 14% to close at RM1.23 on Feb 6, from RM1.43 on Jan 31, giving it a market capitalisation of RM4.11 billion. Shares in AAX, meanwhile, remained unchanged at 13 sen on Thursday from Jan 31’s closing, valuing the stock at RM539.26 million.

 

Is it splitsville for Airbus and AirAsia?

When contacted, a spokesman for Airbus says the aircraft maker remains committed to its presence in Malaysia and to working together with its customers, stakeholders and industrial partners here.

“For legal reasons, we are unable to comment on specific cases included in the recent statements of facts published by the French, UK and US authorities,” the spokesman adds.

According to sources, it would be difficult for AirAsia to cancel any of its aircraft orders with Airbus, as that would result in its having to pay compensation. “It would also make no economic sense to change the airline’s entire fleet of Airbus aircraft,” says one source.

A check on Airbus’ website reveals that AirAsia had ordered 188 A320s, 51 A320neos and 353 A321 neos, while AAX’s orders comprised 30 A321neos, 20 A330-300s, 78 A330-900s and 10 A350-900s as at January 2020.

But the love affair between the two parties, during which AirAsia Group was probably the only major airline to buy planes from only one manufacturer, may well be truly over.

 

https://www.theedgemarkets.com/article/cover-story-airasia-airbus-failed-f1-racing-team

Labels: AIRASIA, AAX
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Edge Weekly Cover Story: AirAsia’s dealings with Rolls-Royce in the spotlight again amid Airbus bribery scandal

Author: Tan KW   |  Publish date: Fri, 21 Feb 2020, 9:51 AM


THE recent Airbus bribery scandal has once again put the spotlight on the 2017 settlement that London-listed Rolls-Royce plc made with authorities to avoid being prosecuted by anti-corruption investigators in the UK, the US and Brazil.

In the Rolls-Royce case, the aircraft engine maker paid £671 million (US$809 million) in penalties after long-running investigations into claims it paid bribes to win export contracts. In comparison, Airbus will pay €3.6 billion (US$4 billion) in fines to the UK, France and the US to settle its corruption case.

Back then, the statement of facts released by the UK’s Serious Fraud Office (SFO) in relation to the Rolls-Royce court case had also implicated an executive of AirAsia Group Bhd (AAB).

At the time, the British Crown Court found Rolls-Royce to have failed to prevent its employees from providing the AAB executive with credits worth US$3.2 million, to be used to pay for the maintenance of a private jet despite them believing that, in consequence, the AAB executive intended to perform a relevant function improperly. The offence was committed between July 2011 and November 2013.

“This financial advantage was given at the request of the AAB executive, in return for his showing favour towards Rolls-Royce in the purchase of products and services provided by Rolls-Royce and its subsidiaries, including Total Care Agreement (TCA) services to be supplied to AirAsia X Bhd (AAX), a subsidiary of AAB,” says the statement of facts.

In August 2011, according to the statement, a senior employee of AAX had made contact with Rolls-Royce employees seeking information about its engine maintenance programme. The enquiry was in respect of a private jet the AAB executive was planning to purchase.

In November 2011, a Rolls-Royce senior employee met the AAB executive and reported to other employees that “[I] met a very offended [AAB executive] ... because of the CorporateCare rate he had been offered on a new Global he has just bought”.

The CorporateCare programme is a service provided by Rolls-Royce for the maintenance of corporate jets. Due to the condition of the private jet, it would require a US$3 million entry fee and Rolls-Royce could only offer a 15%, or US$450,000, discount.

The jet, it was discovered, was owned by the AAB executive, a second AAB executive and other individuals. While the document did not name who the AAB executives were, it was reported that AirAsia group CEO Tan Sri Tony Fernandes partly owned the jet.

In another exchange on Aug 17, 2012, a Rolls-Royce employee had reported to a senior colleague and others that the AAB executive was seeking to make the corporate jet deal “invisible” with its “value covered within additional A330 TCA charges” for AAX.

According to the statement of facts, in July 2013, three contractual documents were signed by Rolls-Royce and AAX. Among them was the Supplemental Financial Assistance Agreement, which refers to the credits of US$3.2 million. However, none of the documents had made reference to the anticipated use.

It was also revealed that the documents were not clear or transparent to anyone other than the AAX senior employee and the Rolls-Royce employees.

“By the end of November 2013, those credits had been transferred by the AAX senior employee to this company. They were then redeemed with the Rolls-Royce civil business unit, which then transferred the funds to RRD (Royce-Rolls Deutschland, the division managing Royce-Rolls’ CorporateCare service) to cover the cost of the AAB executive’s jet entering the CorporateCare programme,” says the statement of facts. The company refers to the vehicle through which the AAB executive and other individuals owned the jet.

In a filing with Bursa Malaysia in January 2017, AAB has refuted reports linking it to a Rolls-Royce bribery case, noting that it has had no dealings or transactions with the company.

Referring to the Bombardier Global Express corporate jet owned by Caterhamjet Global Ltd that was mentioned in an article in The Financial Times on Jan 22, 2017, AAB said it had already gone through the due process and obtained the necessary approval for the transaction from its audit committee and board of directors, and recommended to its shareholders for approval under recurrent related-party transactions circulars at the general meetings held on June 3, 2015, and May 30, 2016.

“The duly obtained shareholders’ approvals were subsequently announced to Bursa on the same respective dates,” it added.

AAB went on to explain that under the agreement executed for the transaction, it was required to make an annual contribution of US$3 million per year for the use of the corporate jet and, in return, Caterhamjet Global would provide a minimum of 75 flight hours per month to AAB executives.

It added that AAB had also entered into an agreement to acquire that same aircraft from Caterhamjet Global on June 21, 2016. Caterhamjet Global was reported to be a company in which Fernandes and AirAsia chairman Datuk Kamarudin Meranun held an 18.56% indirect stake as at January 2017.

Unlike the bribery allegations pertaining to the purchase of Airbus aircraft, the Rolls-Royce case was never pursued by local authorities such as the Malaysian Anti-Corruption Commission and the Securities Commission Malaysia.

However, more recently, on Dec 30, 2019, Indonesian press reported that Indonesia’s Corruption Eradication Commission (KPK) had charged former Garuda Indonesia president director Emirsyah Satar with receiving IDR46 billion in bribes from former PT Mugi Rekso Abadi president director Soetikno Soedarjo pertaining to the procurement of Rolls-Royce engine parts for Airbus airplanes during Emirsyah’s tenure as president director.

Emirsyah served as the carrier’s CEO from 2005 to 2014.

KPK spokesperson Febri Diansyah was reported to have said that investigators are handing over Emirsyah and Soetikno as well as evidence to prosecutors, adding that the trial will begin soon in the Jakarta Corruption Court.

 

https://www.theedgemarkets.com/article/cover-story-airasias-dealings-rollsroyce-spotlight-again-amid-airbus-bribery-scandal

Labels: AIRASIA, AAX
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(AIRASIA) Edge Weekly Cover Story: The deals and email trail behind the graft investigation

Author: Tan KW   |  Publish date: Fri, 21 Feb 2020, 9:51 AM


https://assets.theedgemarkets.com/pictures/CS-Timeline4_TEM1305.jpg

BETWEEN 2009 and 2014, Tan Sri Tony Fernandes authorised the purchase of hundreds of aircraft from Airbus SE for the growth of AirAsia and AirAsia X. However, these purchases seem to have come with strings attached — Airbus had to provide millions of dollars in sponsorship to Fernandes’ personal venture, Caterham F1 Team. Was it an illegal act or a common industrial practice of “offset”? Here, we give the timeline and email trail during the period in review, which have landed Fernandes and his partner, Datuk Kamarudin Meranun, in hot water.

footnotes: Email correspondence cited in SFO’s statement of facts

1.    An MoU was signed between Airbus Employee 1 (senior) and AirAsia Executive 1 whereby US$16 million was to be paid to “further strengthen the relationship between the industrial, research, educational and economic patterns in the Malaysia and play a determining and favorable role in the enhanced penetration of [Airbus] products in Malaysia”.

2.    “Resending previous self explanatory mail with all details attached. Could be further discussed when I will be early next week in KL, should it be convenient to you.”

3.    “Honestly [Airbus Employee 1 (senior)] I’m fed up. You owe me 4 million already and I’m owed 16 million in total. This shd have been paid ages ago when I bought thre first 60 aircraft. I want my money and I want compensation … pay up. I want my whole 16 million now..”

4.    “I am sure that you will understand that paying USD16 million on [Sports team] need some minimum engineering!!!”

5.    “I have not seen all the papers relating to the sponsorship but in general, we need to have some internal link to AirAsia as we can’t get board approval simply to sponsor. Externally there is probably no need to link the two.”

6.    “[Airbus Employee 1 (senior)] as discussed yesterday, please can you pay immediately. It will help close my deal.”

7.    “In the context of its international operations, and in accordance with its policy as regards the development of local footprint, [Airbus] is willing to assist in the development and implementation of projects in support of the operations of AIRASIA where its operates...It is anticipated that in the mid and long term, such support would further strengthen the relationship between the industrial, research, educational and economic patterns in Malaysia and play a determining and favorable role in the enhanced penetration of [Airbus] products within AIRASIA fleets.”

8.    “…overall Contribution to Projects as per the MoU has been established as a maximum amount of USD40 million (US dollar forty million) to be invested between year 2016 and 2026. It is understood that such Contribution may be reassessed from time to time in the light of the effectiveness of the development of its business with AIRASIA.”

9.    “…[AirAsia Executive 1]… insists that we clear the 10m on signing the PA for 200 and that we have a written commitment for the 40m.”

10.    “To invest potentially up to USD 40 million (NOT NOW), it’s mandatory to follow a minimum governance and receive information from the partner...We have to be serious.””

11.    “Following the presentation of the status, and difficulties to gather information and financial data, [Airbus employee 4 [very senior] (Airbus SMO)] confirms that the process to invest has to be followed with no deviation. The agreement in principle has been made and now it is about implementing the agreement in respecting the procedures in terms of documentation, valuation of the activity and assets to be contributed...”.”

12.    “if we want to sign 50+50 A320 CEO deal... 40m + another 10m (new deal)...I believe [Airbus employee 1 [senior]] and his team have done a correct and proper job of building a structure that complies with our Internal rules. The problem is that it is difficult to see how we will complete the obligation using this structure... I would like to suggest that in order to close this subject and move forward with AirAsia we propose the following. Under the structure proposed by SMO we commit 10m for the seats over the next 12months. In addition, we offer a simple sponsorship of [the Sports team] for 10m per year for the next 4 years. The structure for the sponsorship is also in place as we used this method for previous obligations with [AirAsia Executive 1].”

13.    “We will sign for 60m even though we have not signed for 100 more planes. First 40 will be 20 now and 20 next year. Remaining 20 will be 10+10 as we are not sure if we sign for 50 or 100 planes. They will keep a get out clause in the contract in case we don’t sign for any further aircraft but the clause for obvious reasons will not refer to aircraft orders.”

14.    “We have had some good meeting with [AirAsia Executive 1] this week-end in Singapore. AirAsia X is willing to take 25 A330-300s starting in 2015. ... But as you can imagine. [AirAsia Executive 1] is insisting on the early payment of his sponsorship.

We owe 10 musd in both jan 2014 and 2015. He wants it paid now... The incremental A330s will generate a follow-on sponsorship so we need SMO involvement...””

15.    “At the request of SMO I will summarise our deal with [AirAsia Executive 1].

AirAsia X will place an order for 25 A330-300 with deliveries starting in early 2015 ...

As part of the deal, EADS will advance the 10m of sponsorship due to be paid in Jan 14 and the 10m due to be paid in Jan 2015, both to be paid on A330 PA signature and PDP payment. These two payments were due as part of the A320 deal.

The A330 deal will create a new obligation to pay 15m in jan 14 and 15m in jan 15.

I trust that this deal meets with your approval...””

16.    “This is helpful. However, I strongly advise that our contribution to [the Sports team] becomes transparent to the management of AirAsia. For instance, the MD or another legal rep of the airline can acknowledge the contribution. The purpose is to mitigate the risk of being accused of conspiracy on transfer value from the airline to the majority shareholder private interests.””

17. “We need to get this done. If not we don’t have a 25 A330 deal. We won’t get any letter from Air Asia x.””

18.    “I know we still have some compliance issues on the 30m for [the Sports team]. When can we expect a solution. My PA for A330 is now signed but not dated. They will only release when we sign with [the Sports team].””

19.    “[AirAsia Executive 1] has agreed we can announce this month if it is important for Airbus.

However, he wants his contract for the 30m in sponsorship before he agrees.””

20.    “Instead of sponsorship we want to put it as a Grant...”

21.    “I just need to show something serious for auditors. To be honest [Airbus employee 5 [very senior]], and [Airbus employee 6 [very senior]] and I don’t care what it is””

22.    “We have kept our side of the deal...Pls don’t let us down...”

23.    “Now if I bend the rules any more I hope you will see I will end up in trouble...I [sic] standby my commitment of 50m and increase to 55m”.”

24.    “the payments will follow the new delivery schedule 1m per ac from airbus. I would prefer that Airbus provides the money for PR and events or sponsorship related to developing your network.

We will not require any proof or invoice for these payments”.”

 

F1 — a disaster for Tune Group

Tan Sri Tony Fernandes is known as the man who disrupted the Asian aviation industry through AirAsia — the region’s largest low-cost carrier. His private investment company, Tune Group, has also been successful in a handful of other ventures, such as insurance and digital banking.

After AirAsia was set up in early 2000 and quickly became a giant in its own right in the aviation world, Fernandes looked at sport. Among the earlier investments he made in sport was through the Caterham F1 Team, then known as Lotus Racing.

Fernandes said back then that the setting up of Lotus Racing heralded “a new beginning for Asean and Malaysian motorsport”. As team principal, he was obviously very excited about the new venture.

In fact, in an interview with ESPN, Fernandes warned the other more established teams to not underestimate the newcomers, including Lotus Racing.

“Both Virgin (Sir Richard Branson’s Virgin Group was one of the new teams back then) and AirAsia have been to hell and back, and we’re fighters. Don’t underestimate either of us. This talk back from some of the bigger teams is only going to motivate us more,” he said.

However, due to the rigid structure of Formula 1 racing, which requires a lot of investment, the new teams did not stamp their mark on the circuit. After a change in branding — from Lotus Racing to Caterham F1 Team — Fernandes sold the outfit in July 2014.

It is not clear how much Tune Group lost in chasing its F1 dream but the fact that Fernandes asked Airbus to sponsor up to US$100 million to keep Caterham running shows how much was needed to maintain an F1 team.

“Formula 1 was a disaster for me … we didn’t do very well,” Fernandes said in a BBC Radio interview in 2017. Perhaps, some dreams should not be chased at all. — By Kamarul Azhar

 

A cosy relationship

Tan Sri Tony Fernandes and Datuk Kamarudin Meranun built the AirAsia empire with a fleet that consisted entirely of Airbus aircraft. The low-cost carrier became one of Airbus’ largest customers globally in no time at all. It helped that AirAsia was growing rapidly and placing massive aircraft orders.

The cosy relationship between the senior executives of the two companies was not a secret. In 2014, for example, when AirAsia signed Airbus’ biggest deal yet at the UK’s Farnborough International Airshow, the executives reportedly exchanged kisses and  bear hugs.

According to a Bloomberg report, Airbus CEO Fabrice Brégier grabbed his counterpart at AirAsia, Fernandes, and planted a kiss on his cheek after the latter said he would buy 50 A330-900neo airliners. “The passion on display at the press conference flowed from Fernandes to John Leahy, the then Airbus sales chief, who found himself on the receiving end of another peck,” the report added.

Leahy, nicknamed “Mr Airbus”, was a top salesman during his time, known for selling 16,000 of the company’s aircraft, of which more than 400 went to AirAsia. He stepped down in 2017.

In June 2011, in telling the story behind the signing of another deal at the Paris Air Show, Fernandes recounted to Reuters how he managed to cajole Leahy onto the dance floor. “At 12am, John nudged me and said, ‘Tony, can we sign?’ but I said, ‘No, you haven’t danced’.”

When Leahy refused to dance, it took the “authoritarian German voice” of the then Airbus CEO Tom Enders, who served from 2012 to 2019, to get him on the dance floor, Fernandes recalled.

According to the Reuters report, Fernandes said that once he was on the dance floor, flanked by a row of air stewardesses dressed in the bright-red AirAsia cabin crew outfit, Leahy almost did not want to leave. — By Kang Siew Li

 

https://www.theedgemarkets.com/article/cover-story-deals-and-email-trail-behind-graft-investigation

 

Labels: AIRASIA
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