May 29, 2018 / 3:47 PM / 25 days ago

Indian police launch probe against AirAsia boss Tony Fernandes

NEW DELHI (Reuters) - Indian police said on Tuesday they have filed a case against AirAsia Group Bhd (AIRA.KL), the airline’s CEO Tony Fernandes and its domestic entity AirAsia India, over allegations of corruption and breaking rules in obtaining a flying license.

The Central Bureau of Investigation (CBI) accused the airline, some of its employees and third parties of violating India’s foreign direct investment rules while obtaining the license, and of bribing government officials in an attempt to get regulations relaxed to allow AirAsia India to fly international routes.

AirAsia India said in a statement on Tuesday it refuted any allegations of wrongdoing and was co-operating with all regulators and agencies “to present the correct facts”.

The parent group, AirAsia, on Wednesday referred requests for comment to AirAsia India. Fernandes did not respond to requests for comment.

Shares in AirAsia slid 4 percent in early Wednesday trade, compared with a 2 percent decline for the wider market.

The police investigation is a blow for the budget airline, which has been planning to add new jets to its Indian fleet as it seeks to expand in one of the world’s fastest-growing aviation markets.

In its complaint, the CBI said the airline, Fernandes and others “chose to beat the legal frameworks and policies of the aviation sector of India” and lobbied government officials “to secure mandatory approvals, some of them through non-transparent means”.

The Malaysian low-cost carrier in 2014 launched domestic flight operations in India along with local joint venture partner Tata Sons.

FILE PHOTO: Tony Fernandes, CEO of AirAsia, holds a media event in Bangkok, Thailand May 15, 2018. REUTERS/Soe Zeya Tun

At the time, India’s aviation rules required AirAsia India to operate in the domestic market for a period of five years and have a fleet of 20 aircraft before it was allowed to fly international routes.

India in 2017 relaxed the rules by abolishing the five-year clause.

According to the complaint, Fernandes wanted the airline’s Indian operation to be able to fly internationally from day one.

The CBI has alleged that bribes were paid to government officials “for securing permit for operation of international scheduled air transport services”.

The complaint listed five other individuals and a Singapore-based company, along with unidentified government officials.

A CBI spokesman said it was conducting searches at AirAsia’s offices, including in Delhi and Mumbai, without elaborating.

Fernandes is also under investigation in Malaysia in a dispute with the country’s regulator, the Malaysian Aviation Committee, over the cancellation of 120 flights during the general election period earlier in May.

AirAsia Group Bhd, said in January it was considering an IPO of the Indian operation, which had 14 planes at end-2017 with plans to grow to 60 over the next five years.

Additional reporting by Aditya Kalra, and Liz Lee in Kuala Lumpur and Jamie Freed in Singapore; Editing by Alex Richardson and Edwina Gibbs

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