AirAsia likely out of the race for Malaysia Airlines

Khazanah may shelve it altogether amid bribery allegations and scandals involving the LCC’s executives

by AZREEN HANI / pic by MUHD AMIN NAHARUL

AIRASIA Group Bhd could fall out of the race to take over the ailing Malaysia Airlines Bhd (MAB) as the former battles bribery allegations against its top executives.

The low-cost carrier (LCC) has been reported as among the four contenders vying for the ownership of the national airline, but the recent bribery revelation would put such proposal in tatters.

A source told The Malaysian Reserve (TMR) that AirAsia’s proposal may not take off after the company is dogged by the scandal. The management of Khazanah Nasional Bhd may shelve it altogether amid bribery allegations and scandals involving the LCC’s executives, said a source familiar with the matter.

“From the management’s (Khazanah) point of view, even if AirAsia still wants to engage on its proposal, the recent developments would be too risky for them to continue,” the source told TMR.

It is believed that the state-owned fund had favoured AirAsia’s bid although MAB’s single shareholder had not openly revealed its position. The government had said the proposals had fallen short of its evaluation.

“It is illogical for Khazanah to still consider AirAsia as its potential partner at this point of time,” said the source who requested anonymity.

TMR had reported in September last year that Khazanah’s stakeholders had shot down MAB-AirAsia X Bhd (AAX) merger proposal due to the lopsidedness of the deal.

Khazanah, the sole shareholder of the national carrier, is looking to axe the ailing carrier from its books after a botched RM6 billion capital injection into MAB since 2014.

Prime Minister Tun Dr Mahathir Mohamad reportedly said the government is looking at five proposals to acquire MAB.

According to Economic Affairs Minister Datuk Seri Mohamed Azmin Ali last month, there is a need for Khazanah to look at other offers as the existing ones are “not interesting”.

Apart from AirAsia, business daily Focus Malaysia recently reported that Japan Airlines Co Ltd is also among serious contenders for MAB, proposing a RM1.12 billion cash injection for a 25% stake in MAB, leaving Khazanah as the airline’s main shareholder, while the government may retain its golden share in the carrier.

Malaysian authorities are scrutinising AirAsia and its affiliate, AAX, after the UK’s Serious Fraud Office (SFO) stated that the executives at the carriers have been rewarded with US$50 million (RM204.8 million) of sponsorship for a sports team and offered an additional US$55 million in respect of 180 aircraft orders from Airbus SE, agreed between 2005 and 2014.

SFO, however, did not name the two AirAsia executives.

On Monday, Tan Sri Dr Tony Fernandes and Datuk Kamarudin Meranun vacated their executive positions in AirAsia Group effective immediately. They would be on a two-month non-executive position to facilitate a probe by the carrier.

Fernandes and Kamarudin, who built the LCC to become a global brand, had vehemently denied all allegations linking them to the scandal.

“We would not harm the very companies that we spent our entire lives building up to their present global status,” the aviation tycoons said in a joint statement released late on Monday evening.

Meanwhile, another source said Khazanah may have to re-evaluate all proposals and negotiate with other contenders for MAB.

“It may be hard this time because let’s face it, MAB is not exactly the cash cow anyone is chasing after,” the source said.

AirAsia and AAX shares have been on a meltdown since the story broke last Friday evening.

At 5pm yesterday, AirAsia shares fell 13 sen or 10.16% to RM1.15 with 134.8 million shares transacted, while AAX was one sen or 4.17% lower at 11.5 sen, with 26.3 million shares exchanging hands.

Bursa Malaysia’s filing showed the Employees Provident Fund (EPF) disposed of almost eight million shares in AirAsia at the end of last month.

The filing showed the pension fund disposed of 7.43 million AirAsia shares on Jan 28 and another 492,500 shares on Jan 29, before the bribery allegation scandal made headlines. The EPF, however, still holds a 6.29% stake in the carrier.