KUALA LUMPUR •AirAsia Group shares plunged yesterday after federal police in India filed a case against the airline accusing it of corruption - a probe that threatens to delay its India unit's IPO plans and international expansion.
The case, also filed against chief executive Tony Fernandes and unit AirAsia India, is a fresh blow to the airline's embattled leader, who has been under fire for supporting Malaysia's former prime minister and is being investigated over the cancellation of flights during the general election period.
"The (India) investigations could be long drawn and will derail AirAsia India's plans to launch international flights from next year and defer its IPO (initial public offering) targets too," said Ms Corrine Png, CEO of Singapore-based transport research firm Crucial Perspective.
India's Central Bureau of Investigation (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 documents.
Shares in Asia's biggest budget airline slid as much as 10.6 per cent to a one-year low yesterday. Since the Malaysian general election on May 9, they have shed about 20 per cent, giving AirAsia a market value of about US$2.5 billion (S$3.4 billion).
The stock ended 6.95 per cent lower at RM3.08 yesterday.
AirAsia India, a venture with India's Tata Sons conglomerate, said in a statement on Tuesday that it refuted any allegations of wrongdoing and was cooperating with all regulators and agencies "to present the correct facts". AirAsia yesterday referred requests for comment to AirAsia India.
On Twitter, Mr Fernandes did not directly address the accusations but complained about media that reported without fact-checking. He did not respond to a Reuters request for comment.
The flamboyant CEO, who co-founded AirAsia 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 the end of last year, 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.
Ms 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."
AirAsia last week reported a record quarterly profit of 1.14 billion ringgit (S$384 million), due in large part to the sale of a ground-handling services unit.