KUALA LUMPUR (June 1): The ultimate closure of AirAsia India Ltd, which is currently being investigated by anti-graft agency over an alleged bribery and violation of local regulations to obtain an international licence, could shave the profits of Malaysia's AirAsia by as much as RM300 million, according to Nomura Holdings Inc.

“Ultimately, in the event of an outright closure, as much as RM300 million could be impaired on Malaysia's AirAsia side. This has not taken into account footing the bill of closure costs, which is tough to estimate but possibly in the range of RM50 million,” Nomura analysts Ahmad Maghfur Usman and Divya Thomas said in a note to clients today.

Nomura said its calculation followed recent media hype over an investigation of alleged corruption at AirAsia India.

Nomura was merely assessing the impact of a potential worst-case scenario, in the event that the result of the investigation causes local authorities to force AirAsia India to shut its operations down, the note said.

“While we won’t comment on the allegation claims (and leave it to investigations), in this quick note, we assess the potential damage, assuming an outright closure of AirAsia India,” the analysts added.

According to Nomura, other issues that could arise as a result of an ultimate closure of AirAsia India would be the aircraft surplus, which will be returned to AirAsia’s leasing entity.

Nomura said this “would not be an issue, given the strong demand for narrow-body aircraft by other AirAsia affiliates or third parties.”

The analysts at Nomura opined at the same time that a closure of AirAsia India could hurt traffic feeds into its other AirAsia affiliates that also serve similar routes to India, which is primarily Thai AirAsia, and estimated to account for less than 5% of its unit seat capacity. 

“More importantly, this cripples AirAsia’s global ambition, as India is meant to be the hub connecting flights to Europe and the Middle East,” Nomura added.

In summary, Nomura said “a closure of AirAsia India will hurt AirAsia but not as bad as it would be if either Indonesia AirAsia or Thai AirAsia were to close, as the network feed dependency exposure from those two countries is a lot higher, and is crucial for its overall AirAsia Asean network.”

Currently, AirAsia India, along with AirAsia Group Bhd chief Tan Sri Tony Fernandes, are being investigated by India’s top graft-buster agency, the Central Bureau of Investigation, over an allegation of corruption and bribery.

AirAsia India has refuted any wrongdoing, and that it is cooperating with all regulatory agencies “to present the correct facts”.

“We hope to bring early resolution to all such issues,” AirAsia India had added.

At 11.55am, AirAsia Group rose 1.95% or 6 sen to RM3.13, with 4.78 million shares done.