Embattled AirAsia chief Tony Fernandes gets lifeline from PM Mahathir

AirAsia's chief executive Tony Fernandes stepped aside from the company on Feb 3 while the authorities probe unusual payments at the Malaysian carrier.
AirAsia's chief executive Tony Fernandes stepped aside from the company on Feb 3 while the authorities probe unusual payments at the Malaysian carrier.PHOTO: AFP

KUALA LUMPUR - AirAsia's embattled chief Tony Fernandes has received a temporary lifeline from Malaysian Prime Minister Mahathir Mohamad who on Thursday (Feb 6) offered tacit personal approval for the business dealings of the airline's top executives which were deemed fraudulent by British prosecutors in a bribery scandal involving Airbus.

But Malaysian government officials, aviation industry executives and lawyers wonder whether Tan Sri Fernandes, who has long been synonymous with the region's most aggressive low-budget airline, can survive this latest brush with controversy at a time when the aviation and tourism sectors are facing new and still-unknown challenges posed by the coronavirus outbreak.

Wading into the unfolding scandal, Tun Dr Mahathir offered his take on a controversial sponsorship payment by Airbus, calling it an "offset", which he said did not amount to a bribe.

"Usually when we buy parts, we request for an offset. Unless the money goes straight into their pockets, then it is bribery," he told reporters at the administrative capital of Putrajaya.

"If there is another purpose, it is an offset but I cannot decide on this matter," he added.

Why Dr Mahathir chose to comment on the bribery scandal roiling AirAsia at a time when several agencies in Malaysia, including the country's stock market regulators and the Malaysian Anti-Corruption Commission (MACC), have initiated separate investigations into the affair is unclear.

Government officials and lawyers tracking the matter noted that the 94-year-old premier's understanding of it appears to be guided by government procurement contract practices that typically do not apply to private entities that have to answer to public shareholders.

AirAsia and its long-haul low-cost subsidiary, AirAsiaX, have been rocked in recent days by the fallout from the bribery scandal. Last week, Airbus agreed to pay a record US$4 billion (S$5.5 billion) in fines after reaching a plea bargain with prosecutors from the United Kingdom, France and the United States over alleged bribery and corruption that go back more than 15 years.

Prosecutors at the UK Serious Fraud Office said that Airbus paid US$50 million in sponsorship to a sports team jointly owned by two AirAsia executives as a reward for an order of 135 aircraft.

 
 
 

Though the executives and the sports team were not named, Malaysian government officials and aviation sector executives said that Mr Fernandes and his joint-venture partner in AirAsia, Mr Kamarudin Meranun, were implicated. The sports company cited was the Caterham Formula One team that was privately owned by the two businessmen in their personal capacities.

Both the AirAsia founding shareholders have denied any wrongdoing and have temporarily stepped down from their top positions in the two companies pending the ongoing probes. Both executives could not be reached for immediate comment and a senior independent director at the AirAsia group also declined to discuss the matter.

The fallout from the Airbus scandal has implicated prominent aviation sector executives and companies in several countries, including Sri Lanka, Taiwan and Colombia.

But there is particular interest in the Malaysian case because of the near rock star status of Mr Fernandes in aviation circles.

The Airbus bribery scandal comes at a time when Mr Fernandes is facing separate corruption charges in India, where the authorities said that he was involved in a sham contract "for allegedly paying bribe to unknown government servants and others for securing a permit for international scheduled air transport services".

Malaysian government officials now say the regulatory agencies could revisit other claims of alleged unsavoury business practices at the private Malaysian airline that were not investigated in the past.

In a case initiated by the UK Serious Fraud Office in 2017, Rolls-Royce Holdings admitted to providing more than US$3 million worth of credits to an unnamed AirAsia executive in connection with an engine contract with the expectation that the funds would be used for the maintenance of a private jet.