An investigation into allegations of bribery involving two former Indian ministers and airline boss Tony Fernandes sent shares of budget carrier AirAsia to a six-month low on Wednesday.
The budget airline’s shares fell up to 6.3% in Kuala Lumpur on Wednesday, their lowest level since late November, before edging back up.
Indian authorities raided the airline’s local offices and accused Fernandes of illegally obtaining operating licenses. The case is being investigated by India’s Central Bureau of Investigation (CBI) and is alleged to have taken place during the previous Indian government headed by former prime minister Manmohan Singh.
The CBI claimed AirAsia paid bribes to get rules changed to obtain an international license and Foreign Investment Promotion Board (FIPB) clearances, NDTV reported. Malaysia-based AirAsia Berhad entered into a joint venture with Tata Sons to set up AirAsia India and start its low-cost carrier operations in India in 2014.
The CBI has named 10 accused, including AirAsia Group CEO Fernandes and Tata Trusts Managing Trustee R Venkatraman for allegedly trying to manipulate government policies through corrupt means to get an international license for its Indian venture.
The CBI also named Rajender Dubey, the Director of Singapore-based HNR Trading Pte Ltd, who allegedly acted as lobbyist in getting the 5/20 rule relaxed. The 5/20 rule is a requirement by the Indian Aviation Ministry under which national carriers are required to have five years of operational experience and a minimum fleet of 20 aircraft to fly overseas.
The current Indian government amended the rule in June 2016, removing the five-year operation clause. Dubey was allegedly instrumental in facilitating meetings for AirAsia officials with Indian bureaucrats to get the clearances. AirAsia officials allegedly paid bribes to circumvent the rules.
According to the initial report from the Central Bureau of Investigation, the AirAsia Group of Malaysia was indirectly allowed day-to-day control over its India arm, which was a violation of the then guidelines. Foreign airlines were allowed to own up to a 49% share in domestic airlines, but effective management control was to remain with the Indian partner.
The report also names “unknown public servants” from the Civil Aviation Ministry, the then Foreign Investment Promotion Board, R Venkataramanan, Director AirAsia and the AirAsiaGroup Deputy CEO T Kanagalingam, alias Bo Lingam.
However, AirAsia (India) director Shuva Mandal responded to the claims. “AirAsia India Limited refutes any wrongdoing and is cooperating with all regulators and agencies to present the correct facts. In November 2016, AirAsia (India) had initiated criminal charges against its ex-CEO and had also commenced civil proceedings in Bangalore for such irregularities. We hope to bring early resolution to all such issues.”