Shares of budget carrier AirAsia Bhd yesterday fell to a six-month low after Indian authorities raided the airline’s local offices and accused its chief executive Tony Fernandes of illegally obtaining operating licenses.
The Indian Central Bureau of Investigation on Tuesday said it was probing allegations that Fernandes illicitly lobbied Indian officials for favorable treatment for his Malaysian-based carrier.
Officers raided AirAsia offices in major Indian cities as part of its investigation.
AirAsia has denied any wrongdoing.
The carrier’s shares fell as much as 6.3 percent to 3.10 ringgit in Kuala Lumpur, their lowest level since late November last year, before edging back up.
The investigation is a blow in a market that AirAsia had singled out as a major destination to expand.
Corrine Png (方華婷), chief executive of Asian transport equity consultancy Crucial Perspective, said investors might be concerned as “investigations are likely to impede” plans by AirAsia India Ltd to expand out of the domestic market next year.
“International flights will be more lucrative for AirAsia India than domestic operations where competition is stiff,” Png said.
However, she also said that the impact on AirAsia as a whole was likely to be minor as the India branch was only a small part of the company.
Fernandes was accused by investigators of campaigning to have aviation regulations relaxed in his favor, the Press Trust of India news agency reported.
One of these was the so-called 5/20 rule stipulating that companies must have five years of domestic experience and a fleet of 20 aircraft before being eligible to operate abroad.
Besides Fernandes, investigators also named an AirAsia director, an aviation consultant and unidentified Indian government officials in its preliminary case.
AirAsia and its local joint venture partner, Tata Sons Ltd, in 2014 launched domestic flight operations in India by offering eye-catching promotional fares to lure budget travelers.
Fernandes, a millionaire former music executive, has styled himself as Asia’s answer to British tycoon Richard Branson.
The company ran into trouble this month when Air Asia India chief executive Amar Abrol stepped down, citing personal reasons.
Additional reporting by Bloomberg
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